COVID-19 Impact on Forex Trading

The coronavirus epidemic plunged the whole planet into disarray. More than half a year later the adoption of COVID-19, the global community is still coping with significant uncertainties. Large numbers of people have lost their jobs, and the future of individuals and companies all around the world is uncertain.

In this light, the present surge in FX trading appears even more surprising. As those who understand what FX is, the previous few months have seen significant expansion through a wide range of trading platforms and commodities.

According to the analysis, trade volumes increased dramatically between March and June, climbing by almost 300 percent over that time period.

Growing rates were higher in emerging nations, with African, Eastern European, and Southeast Asian merchants accounting for 60% of new accounts. Many traders focus entirely on secure goods and currencies, while others aim to capitalize on possibilities, such as shifting crude oil demand.

The sharp growth in market activity and bank details put significant strain on forex brokers. Small FX  brokerages may not be a good pick for traders due to employees working remotely and liquidity concerns.

The resilience of USD towards the COVID-19 crisis

The pandemic has had no effect on the US currency at the start of 2020. Because of the US economy’s generally favorable performance and distance from China, the US dollar outperformed a fixed exchange rate, including the safe-haven Yen, which fell as traders anticipated higher risk in Asian currencies.

Fast forward to 2021, and the USD was under pressure as a result of the virus’s unrestrained spread throughout the country in 2020. Analysts and experts from some of the best Forex brokers online in the U.S. are universally negative about the status of the safe-haven currency, forecasting a steep and persistent slide in the first and the second quarters.  Nevertheless, with a difficult election now in the rearview mirror, a successful vaccination launch in full gear, and the deployment of ambitious steps to create robust economic growth, those forecasts have been mostly debunked thus far, and the dollar has outperformed other major asset classes.

Considering the second half of 2021, investors will be watching how other nations emerge from the epidemic, since worldwide economic growth may cause the USD to drop in value.

Coronavirus impact on Euro

For a multitude of reasons, Covid-19 has had a substantial influence on the euro. Because the Eurozone is more directly linked to global commerce and has more extensive linkages with China, the downturn impacted the euro more quickly at first. Furthermore, the economy was in a more vulnerable position than the US and the UK, placing pressure on the domestic currency, and thus the virus arrived at a time when the economy was already ailing.

The epidemic has had a significant impact on the Eurozone, raising concerns about a double-dip crisis and recession. Economic rebound is expected to lag behind that of China and the United Kingdom and will be heavily reliant on the renovation of production processes and the successful execution of an immunization rollout, the latter of which has experienced harmful interruptions due to production, distribution, and concerns about side effects. The vaccination rollout is currently gaining traction, which will undoubtedly boost the economic picture, but it remains well behind that of the United Kingdom and the United States, respectively.

Commodity-based currencies are still struggling

Commodity currencies, like the Canadian dollar, were among the first to be affected by the outbreak. A drop in Chinese demand for oil had an instant effect on oil pricing, exerting pressure on the Canadian currency. The CAD, on the other hand, has stayed rather robust, entering 2021 in a solid position versus major currencies and reaching a six-year peak at the start of the second quarter. The CAD is continually increasing, owing to rising commodity costs. Nevertheless, this comes with its own set of dangers, including the possibility that additional increases might make Canada less competent as a commodities exporter, pulling down predictions and harming their investment profile.

The effect on commercial routes and tourists in Australia and New Zealand was also rapid since both countries were eager to seal their borders. Since both nations have been widely admired for their achievements in restricting the virus’s transmission and, as a result, their ability to enjoy an open nation’s industry and regular life privileges, Australia in particular has come under criticism for its strict migration policy. Many observers argue that, while restricted borders have benefitted public health and liberties, the economic impact will be terrible, since the Australian economy is losing ground without overseas students and tourists, for example.

With both Australia and New Zealand already accelerating their vaccination implementations and arranging successful trade agreements with the post-Brexit UK, a possible tipping point is on the way. Traders will be watching how countries reintroduce themselves into the international economy after a prolonged period of isolation.