If you are seasoned in the forex world, you will recognise that there is some major growth taking place and even more so expected in the future. To stay up to date you can check out an to help you or you can continue reading.
When the foreign exchange was, well, a foreign concept, no one would have predicted the extent to which the market would have grown. This is a good thing. FX is practically available to anyone who is able to understand how it works, as well as those willing to learn, and if you have some spare cash you want to see grow over time, then this market is definitely for you.
Let鈥檚 look at the foreign exchange market and some growth it is going to experience in the next four years. 听
Growth between 2022 – 2026
Can you believe that foreign exchange market growth is expected to sit at $1.94 trillion for the period 2022 – 2026? The (CAGR) is predicted to be around 8.87%. These are figures that those in the market are extremely happy about. Further predictions show that most of the growth will come from the North American market with a massive 46% of growth coming from the region alone. Furthermore, the US market is the biggest player in North America. If we look at the European and APAC regions, much slower growth is on the cards. However, further monitoring throughout this time period will offer some more insight.听
Where are the drivers and the challenges?
A key driver in the continuous growth is the spike in urbanisation, as well as digitalisation. Now, why is that? The global foreign exchange market has seen a steady decline in manual operations and this is where we are seeing some key drivers. More and more automation is being implemented, specifically in workflows which leads to better productivity.
To improve client experiences and relationships, the implementation of digital tools to streamline processes and systems is seen as the key driver to the market鈥檚 exponential growth. Furthermore, market participants are developing and want to develop tools that will improve on data that in turn help investors to make better trading decisions, as well as reduce risks. What鈥檚 also great is that traders are able to gather and analyse data using artificial intelligence. This is ground-breaking since the benefits include the ability to analyse data that in turn leads to better trading decisions, but there are some challenges.听
The biggest challenge that puts a damper on growth is that the future of exchange rates is mainly uncertain. What does this mean? If a currency isn鈥檛 protected enough when it depreciates, this creates a risk that could potentially lead to a loss of money. Here is an example. You are selling goods that need to be shipped to a different country. Let鈥檚 say you and your buyer agreed that they would pay 拢525,935 for the shipment and the dollar is worth 拢0.85, collection will then be 拢425,000. However, let鈥檚 say the dollar decreased in value by 拢0.85 then the seller will be losing 拢5,000 since payment will then only be 拢420,000. It is important to note that it鈥檚 not all doom and gloom that the above scenario presents an opportunity in itself.
Generally, you will find that exchange rates between countries will reflect changes that were forecast in advance. 听
Trends for 2022
Let鈥檚 for one moment focus on currency pairs and what we will see for the rest of 2022. Across the globe, and many predict the rest of 2022 will be the same. There are also a few currency pairs that will consistently dominate the market for the rest of the year, these include EUR/USD, USD/JPY, and GBP/USD. The top currencies in North America and Australia are USD/CAD and AUD/USD. Since these are merely predicted trends, you must note that major investment banks are the ones who agree on the strength of currencies. Furthermore, the dollar will remain strong in Europe, and this comes as no surprise. If we look at the UK, trends show that the pound will weaken but the region will be more competitive.听