The global foreign currency market facilitates international trade and offers investors and traders opportunities to make gains from buying, selling, and exchanging currencies. Forex trading, a $6 trillion market, is shaped by several factors, including geopolitical events and economic indicators. Individuals and corporate organisations can explore business opportunities in the forex market and trends that shape outcomes.
Current Landscape of the Forex Market
Central banks and financial institutions currently dominate the forex market, moving huge amounts of foreign exchange daily. Central banks are also involved in regulatory decisions and monetary policies that influence exchange rates. Other financial institutions involved in forex trading help companies and individuals process international payments and trade currencies as part of wider investment strategies.
Retail traders are also active in the forex market, constituting a minor share of market volumes. Retail forex trading is made possible through financial services companies that offer brokerage services online so that traders can access markets via smartphones and computers. Although the basic principles remain the same, the forex market has changed over the years thanks to strides in technology.
Regulatory policies have also impacted forex trading. Governments are focused on protecting traders and the economy from scams, theft, and money laundering and keeping exchange rates from negative volatility.
Major Trends Shaping Forex Markets in 2024
Many events, policies, and developments across sectors shape the forex market. The major trends in 2024 influence the market at local and international levels, forcing central banks to adjust policies to better manage exchange rates. The wave of proprietary trading also impacts retail forex traders, potentially increasing market participation.
Geopolitical Factors
Geopolitical factors continue to impact global markets through currency valuations and market volatility. The markets opened for 2024 with uncertainty driven by the Russia-Ukraine conflict, with Europe battling high gas and energy costs last winter. The US-China trade and technology tensions also impact market volatility, driving currency prices.
The ongoing development of new trade alliances and shipping routes targeting a shift from the US Dollar as the dominant global currency has shaped forex in 2024. Currency types like the Russian Ruble, Chinese Yen, and Indian Rupee are seeing more use in the oil trade. There are increasing signs of ‘de-dollarisation’, with analysts identifying potential shifts in 2024 and beyond.
Geopolitical factors influence investors’ behaviour as they seek currencies that are more stable and perceived to have fewer risks. For example, the Japanese Yen shows resilience in global market uncertainties and is one of the safe haven currencies where emerging currencies may be under pressure.
Economic Indicators
Trends also influence the forex market in GDP growth, inflation rates, and employment figures. The UK, US, Europe, and other major economies have endured periods of inflation in the last decade, and while they have largely recovered some levels, the downward pressure remains in 2024.
The Bank of England (BoE) became more hawkish in 2024 but has brought inflation to the 2% target after holding interest rates steady for some months. The US Federal Reserve has also largely been hawkish in 2024 but has slowly changed its stance to slightly dovish, as they expect a hawkish cut in the coming months.
Employment figures also play crucial roles in monetary policy decisions and as micro factors for forex trading. The forex market reacts to the non-farm payroll figures in the first week of the month. Employment data show interesting trends, from job additions to pay rises across industries. The NFP data for the UK markets in 2024 is largely positive.
Technological Advancements
Algorithmic trading, AI, machine learning, and blockchain are the biggest tech trends shaping financial markets in 2024. Algorithmic trading allows traders to program computer robots to analyse and execute trades.
AI and machine learning are being applied to enhance technical and fundamental analysis, pattern recognition, security, and fully automated trading. Blockchain has revolutionised financial services and currently supports the crypto market, but the technology has broader applications even in traditional finance, such as loans, raising capital, and currency trading.
Generative AI is a growing trend that is attracting attention and security concerns, especially in the financial sector. Brokers and other financial services companies are shaping up for changes that security measures may require.
Proprietary Trading
One of the biggest trends in 2024 is traders having the chance to trade financial markets with huge funds they do not own. Many FinTech companies now offer proprietary trading products, allowing traders to purchase and pass challenge accounts and then gain access to trading capital worth thousands of pounds while having the chance to share profits up to 90%. The impact has been significant in 2024, with more traders getting ahead of the curve with access to huge trading capital.
Business Opportunities in Forex Trading
Although traders focus primarily on buying and selling currencies, there are other profitable business opportunities. Identifying profitable currency pairs is a business opportunity for analysts with excellent records. Investment firms rely on analysts to track markets and identify profitable setups while getting paid for their services.
There are also business opportunities to build and deploy technologies for competitive advantage. For instance, training AI-powered algorithms for enhanced forex trading, deploying AI security systems to anticipate and neutralise threats, and products that improve the speed and stability of trading platforms.
Trading Forex Trends
Trends bring opportunities that smart traders can ride. Additional jobs and lower inflation typically strengthen a currency and can trigger short-term appreciation. Trading trends require a deep understanding of market movement and the ability to sport trends as they begin. It is also important to trade with a broker that can handle fast-moving markets and support traders.
