How Forex Trading Has Changed Due to COVID-19

Among the major changes are the forex markets being particularly volatile due to all of the uncertainty. Here are a few other ways in which the pandemic had an impact on the world of forex trading:

Big Impact on Major Currencies

Most countries took different approaches to the pandemic. Some were very restrictive, while others tried to have minimal restrictions in place.

For countries that were very restrictive and had many COVID-19 cases, they often saw their currencies weakening. Those economies that managed to stay somewhat on track had a greater level of stability with their currencies. This was particularly the case in the first few months of the pandemic.

One of the big impacts saw GBP falling 15% versus the USD in the beginning half of 2020. This was the lowest level it had been in about three decades. In 2021, as the second wave of the virus spread, the USD began to come under more pressure following the initial stability.

Significant Fluctuations in Emerging Currencies

There was a huge amount of volatility with currencies in emerging markets. Many people retreated to holding USD and getting out of some of the more volatile currencies as a result of the volatility. For example, the South African rand saw a 32% drop compared to the USD in the beginning months of the pandemic. The Mexican peso had a 24% drop in a similar period of time.

Many analysts were forecasting that emerging economies might depreciate their currencies in an effort to protect their economies. This would help growth to continue rather than remaining stagnant. However, the downside of such an approach is the undervaluation of certain currencies in emerging markets. It can then have an effect on the purchasing power of the currency.

Shifts in Trading Styles

There weren’t just market changes on the back of the pandemic, styles of trading also altered. According to a recent survey of forex traders, there was a big increase in the trading volumes on single-dealer platforms, as well as an increase in the level of voice trading.

There was a shift in the psychology of many traders who realized how important it can be to create strong relationships with forex market dealers. This was particularly the case when there were dips in liquidity.

There was also a move towards trading smaller volumes, with traders starting to break up their bigger trades into smaller chunks. It is likely that these trends will remain in place even post-pandemic.

Conclusion

With ongoing uncertainty in the world due to the current conflicts, pandemic recovery, and rising inflation, it is likely that forex markets are going to remain volatile for some time. Businesses are now looking at how they will be able to adapt to changing tides.

As many unknowns still remain, it creates a lot of potential opportunities for traders. It allows you to improve your skillset and continually strive towards profitable trading. Remember, to trade with a regulated and secure broker like Forex4you. Working with a broker like this can open up the gateways to the markets and remove a lot of uncertainty about trading for a beginner.

Forex Trading involves significant risk to your invested capital. Please read and ensure you fully understand our Risk Disclosure.