FX markets return to the volatility doldrums after some platforms closed their clients out – Op Ed
Meir Velenski notes that as the Trump era gives way to the Biden presidency, weaknesses in FX and spread betting platforms are being exposed as orders are closed out due to inability to cope with volatility, leaving some retail traders out in the cold.
By Meir Velenski, CEO of Velenski Financial Group. Meir Velenski has 30 years expertise in electronic trading having held several leadership positions within major firms, and is a consultant to brokerages globally
Joe Biden, Who would have thought that he would be President? I don’t believe that he himself believed he would be President
One thing was for sure under President Donald Trump. The level of volatility went through the roof and this was well predicted. Donald Trump was clear from the outset and that was to focus on rebuilding America and this he did.
In fact he is the only President whose whole term passed without there being a war. Donald Trump is a businessman. Erratic and unpredictable at the best of times, but he did do a huge amount in helping rebuild the economy and find Americans jobs.
Now there is a new unknown future, as the incumbent leader in the name of President Joe Biden enters his term, as he actually has not achieved much despite having a long political career and was chosen as an “anyone but Trump’ ballot.
Joe Biden and his cabinet will be pushing through huge and ongoing amounts of financial boosts and assistance to the tune of trillions of dollars. This alone should allow for the US Economy to establish new growth and get unemployment down.
The listed derivatives markets during the Trump Era, as I mentioned, were very volatile and the bull market continued and it’s a known sentiment that Markets climb a wall of worry. There were periods of extreme volatility and few can doubt the extreme volatility which began in February 2020 and continued to the end of the year caused by the Covid 19 related political activity. What’s interesting about this point is that the whole world is suffering from economic disaray apart from China which has returned to significant growth!!!! A little strange, I would say.
The markets, especially the Nasdaq and the tech stocks are flying based on the need to socially separate, stay indoors and work from home. The appetite for risk is high and investors are offloading safe stocks and going back into higher risk higher reward investments.
In a market where risk is a desirable commodity, especially what we have seen lately with day traders causing platforms to crash like IG Markets, Charles Schwab, Morgan Stanley, and more recently E*TRADE whose platform was down on Wednesday for several hours ,with IG then crashing again in the evening, things are definitely interesting in the OTC sector.
In fact day traders at IG Group tried to close positions that were in profit only to have them closed automatically at a loss by the downed platform. I will actually be writing another opinion piece very soon on how some spread betting firms do not honor trades in circumstances such as this.
The US Dollar will likely get weaker over the next 4 years. The policy of Joe Biden and his liberal cabinet is to fund, pay and spend on good global causes as well as pump money into the US in large doses indefinitely over the next 4 years.
This approach gives investors and FX traders confidence that the economy will grow as more money means more consumer spending and more consumer spending means more growth.
This will drive the dollar lower as Investors will move out of safety,( which is the US Dollar) and look for riskier currencies.
When the US Dollar is cheap it means that there is a lot of monetary ease and it allows the free flow of goods. In addition a cheap dollar makes American goods overseas cheap thus causing a rising demand for US goods thus boosting profits for US firms.
So in short, you can expect the US Dollar to become historically cheap through the Biden term and for FX markets to show less volatility than they did during the Trump period.
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