Coronavirus and Forex: How has the public health situation impacted the market, and, more importantly, brokers?

It is predicted that this COVID-19 pandemic is also having a direct impact on the global foreign exchange (forex) market. This crisis has turned the world and triggered high volatility in forex market which has driving ‘risk-off’ trading patterns. 

But how this crisis has affected the market so far and more importantly, brokers. 

US Fiasco 

COVID-19 pandemic will continue to have a huge impact on markets for a long time, but investors are still readily buying US dollars. Demand for the dollar soar as a haven has been seen because of its status as the global reserve currency even the United States’ reluctant to take early measures to prevent the outbreak of COVID-19. 

Furthermore, as reported by CNBC on March 9, the Federal Reserve’s willing to provide as much liquidity to the market as possible which helping to preserve the dollar’s value to investors. 

The economists predict that recession in United States will slowly recover as their slow reactions to the crisis at the first place. 

Crisis in Europe 

As country like Italy, Germany, Spain, and France recorded highest death tolls in Europe, the currency in Europe is understandably on a downward trend since the start of the year. 

Traders are more likely to trade in the US Dollar as a more stable currency even though the European Central Bank (ECB) decided to meet for further stimulus to fight the economic impact of the COVID-19 on March 12. This is caused by the markets that refraining from lowering interest rates. 

However, countries within the EU are introducing early steps in preventing COVID-19 after learning from previous mistakes in countries most affected by the pandemic. This proactive approach leads with the recovery of the euro in the long term and makes an immediate economic recovery. 

Impact in China and Australia 

The current movements in Australian dollar demand are driven by the restricted of Chinese renminbi within limited ranges. The Australian dollar is often use by traders as a proxy for China. 

The Australian dollar is viewed as a ‘risk currency’ as reported in MarketWatch and due to probability of a recession in Australia to rises and commodity prices fall, traders tend to avoid in periods of instability. 

When the outbreak of COVID-19 started in China, the country is understandably taking the first hit on the forex market and Australian dollar has a major impact as China is Australia’s largest trading partner. 

Brokers’ situation 

Overall, 2020 is vapid year for forex market with low market volatility and a tightening regulatory environment resulting in low client activity. But, started from February, many brokers feel the impact of COVID-19 and reported that a significant increase in trading volumes are seen. 

Therefore, many trading providers managed to report strong volumes during February, with some brokers even managing to hit record volumes, as the COVID-19 pandemic continued to boost trading activity. 

London-based, FCA-regulated spot forex and contracts for difference (CFD) liquidity provider, Doo Clearing Limited reported a new record high in trading volumes during the month of March 2020. Total trade volume for March 2020 was recorded at over US$2.9 billion, representing an increase of over 122% since February, the highest rate of increase yet. 

Within these statistics, it was reported that CAD/USD, XAU/USD and EUR/USD were the three highest performing trade pairs during this period, with CAD/USD reaching 47.5% of total trade volume. 

How Doo Clearing can help? 

As a reputed and trusted liquidity provider, Doo Clearing continues to expand its liquidity offerings and update its infrastructure, firmly establishing itself as a competitive liquidity provider that remains committed to providing reliable, advanced and secure systems to its diverse and ever-growing community of primary and regional dealers, professional trading groups and other institutional traders around the world. 

Doo Clearing offers comprehensive liquidity clearing system that includes modules such as liquidity access, quotation aggregation, liquidity distribution, risk management, full MetaTrader 4/MetaTrader 5 systems integration, reporting and system health monitoring. 

Get started with Doo Clearing today. Our Specialist teams are always here to assist with your brokerage needs. 

London Office 

Phone: +44 2071128722  

Email: [email protected].co.uk  

Website: www.dooclearing.co.uk 

Hong Kong Office 

Phone: +852 95612013  

Email: [email protected]  

Website: www.dooclearing.com