Forex: the changing currency market

Since the Covid-19 pandemic hit the whole world, its shockwaves have significantly weakened the global economy. For many, this represents the worst economic crisis since the Great Depression of 1929. For the countries of the European Union, the United States, the United Kingdom and Japan, the covid-19 crisis caused a sharp drop in share prices. That said, the outbreak has certainly had a major impact on financial markets around the world, but prices have quickly rebounded. Throughout this article, we will mainly focus on the case of Forex, a market in which all those who wish to buy or sell one currency against another are confronted.

Forex: what does it refer to?

Before getting to the heart of the matter, it is first necessary to understand the particularities of this market. The term FX or Forex (for Foreign Exchange) refers to the foreign exchange market (or currency market) around the world. It is a market where foreign exchange transactions take place. Specifically, it brings together different actors including:

  • Companies (multinationals or SMEs) and, very rarely, individuals who wish to buy and sell currencies based on their businesses. To access Forex, these players are forced to contact their bank
  • Banking institutions (investment banks, commercial banks, etc.) and intermediaries operating both on their own behalf and on behalf of ordering customers
  • Monetary authorities (central banks in particular).
  • International institutions, including the World Bank, the IMF, the OECD …
  • Investment funds…

Although this market is unregulated, it still hosts an offering of regulated categories (very small in size). derivative products as speculative and hedging instruments. In all cases, Forex is dominated by the USD (US dollar) and is one of the most important stock markets in the world.

The foreign exchange market in the face of the covid-19 crisis

As mentioned above, financial markets, including Forex of course, have nonetheless shown resilience despite the great shock of spring 2020. They owe this resilience to central banks and their policies. More precisely, these organizations have played the cardmassive purchase of government bonds. In doing so, each of the central banks raised its prices by lowering its ” report rate “. The acquisition of financial assets by central banks has, on the one hand, led to a decline in risk-free rate (component of the reporting rate) which, in turn, offset the increase in risk premium (another component of the reporting rate). As a result, prices were suddenly revised upwards. The central bank decision also allowed US economic agents to recover. They experienced a significant awakening of optimism for future income and raised their expectations.

In short, while the health and economic crisis caused by covid-19 was accompanied by brutal short-term impacts, the stock markets were still able to hold their own and their attractiveness in terms of profitability has not only increased. According to experts, financial markets as well as Forex trading have been “vaccinated” by central banks and the governmentS&P 500 index therefore it did not take long to return to the level of early 2020. As for Europe, even if the situation turned out to be relatively mixed, the ” Stoxx 600 (a stock market index that includes more than 600 of the main European stock market capitalizations) has managed to recover almost half of its losses.

As for the foreign exchange market, investors and traders have abandoned emerging market currencies in favor of the USD. Having achieved good results since the beginning of 2020, the latter has been considered something of a safe investment. And for good reason, the USD is the most liquid currency there is and the US economy is less dependent on external demand. However, the US Federal Reserve ended up offsetting the interest rate differential in the rest of the world, which significantly weakened the US dollar.

Concretely, we can expect most emerging market currencies to enjoy stronger gains versus the US dollar once the global economy and markets begin to stabilize over the longer term. But for now we have to admit that the foreign exchange market is experiencing fluctuations, the date the outbreak will end remains unknown to this day. Forex therefore remains more or less risky as it is difficult to accurately predict sales for a given period. That is why everyone who wishes to venture there has an interest train and exercise upstream.

forex

Forex Trading: the importance of training in advance

In the face of the wind of uncertainty that covid-19 continues to blow to this day and the volatility of the foreign exchange market that remains proven, people who wish to become a Forex trader obviously need to train before moving forward in earnest. To do this, they have to move towards a online Forex trading training platform. The latter is designed to mimic the real functioning of the currency market and allow trader apprentices to master the basics of Forex Trading, to effectively decipher Forex charts, and subsequently to virtually tests different types of tools and strategies with virtual money. In other words, the site will make them a better trader, allowing them to save a lot of money in the long run and to invest effectively despite the fluctuations that the foreign exchange market is subjected to today. .

The most trusted and effective training platforms provide budding Forex traders with a rich library of demonstrations, tutorials, articles and other training material regarding Forex Trading. They also offer their users a intuitive simulator and offer them the opportunity to interact with an online community. After serious and extensive training, budding traders can open their Forex account on the same platform and start developing a strategy that is as effective as it is efficient, predicting the market, calculating the profit / loss ratio on their transactions, trading consciously. and get the most out of Forex.

Keep in mind that CFDs are complex instruments that come with a high risk of losing money quickly due to leverage. 71% particular investment accounts lose money when trading CFDs. You should determine if you understand how CFDs work and if you can afford to lose your money.

Source:

The impact of the coronavirus on the financial markets | all the news

Leave a Reply

Your email address will not be published.