Forex traders fret as sleepy markets slow to calmest in years - Reuters

Forex traders fret as sleepy markets slow to calmest in years - Reuters
The Main Differences Between Forex and Crypto Trading - The Daily Hodl
The pound's volatility due to Brexit is a headache for FX traders - Quartz
RPT-GRAPHIC-Forex traders fret as sleepy markets slow to calmest in years - Reuters

Posted: 01 Apr 2019 05:15 PM PDT

LONDON (Reuters) - The $5.1-trillion-a-day foreign exchange market is suffering more than most from central bank decisions to move in tandem and keep interest rates low for longer.

FILE PHOTO: U.S. dollars and other world currencies lie in a charity receptacle at Pearson international airport in Toronto, Ontario, Canada June 13, 2018. REUTERS/Chris Helgren/File Photo

Policymakers moving to press pause on policy tightening in 2019, as well as broadly mixed messages from the biggest economies, have combined to suppress already-low volatility to levels not seen in five years.

Forex traders who look for economic and policy divergences to bet on are struggling to find persuasive reasons for betting on one currency moving much against another. Hedge funds and asset managers are sitting on the sidelines, and daily trading volumes are down by double-digits.

Even a rush into government bonds by panicked investors and increased swings in stocks at the end of March were not enough to shake currencies out of their stupor, fuelling concerns on bank trading desks that generate bigger profits when prices swing more wildly.

Below are four graphics illustrating just how stuck in the doldrums FX markets are.

Volatility fell to its lowest levels since late 2014 in March, according to the Deutsche Bank Currency Volatility Index.

For an interactive version of the below chart, click here tmsnrt.rs/2V7E5Iw.

(For a graphic on Currency volatility falls below historical average, see - tmsnrt.rs/2VdZDDC)

The index, which measures three-month implied volatility - a commonly-used measure of expectations of price movements - weighted across major currency pairs, touched levels of 6.22, down from 9 in January.

Averaged out across the first three months of 2019 volatility was slightly higher than previous quarters but the trend is clear: currency markets have become far calmer since 2016.

DOVES DOMINATE

Calmness in the world's most traded currency pair, euro/dollar, was particularly notable after the U.S. Federal Reserve flagged an end to its rate tightening cycle and the European Central Bank followed with its own dovish shift.

Three-month rates of implied volatility touched their lowest since 2014, and barring that year, were near their lowest levels since 2007.

With concerns growing about slowdowns in both economies the exchange rate was pinned into its narrowest ever trading range - of less than four cents this compared to an average quarterly range of around 9 cents. It hit a record 24 cents a decade earlier.

(For a graphic on Euro/dollar stuck in narrowest quarterly range on record, see - tmsnrt.rs/2WxrsXw)

Swings in the dollar against Japan's yen, traditionally a more volatile exchange rate, haven't fared much better - three-month implied volatility dropped below 6 in March, levels seen only occasionally in the last three decades.

(For a graphic on 3-month implied volatility, see - tmsnrt.rs/2HOepOl)

Sterling volatility has been more elevated due to Brexit uncertainty and the Turkish lira has also swung sharply, but these have been the outliers.

Traders don't expect an immediate pick-up in volatility as long as central banks move together and economic data remains weak but not so weak that it sparks a stampede out of riskier assets.

Higher spikes in volatility in other asset classes, as measured by the VIX or "fear index" in equities, or in the U.S. Treasury market, underline investor nerves but have not spilled over into markedly bigger swings in the prices of currencies.

(For a graphic on Volatility across asset classes, see - tmsnrt.rs/2VaO9AC)

Editing by Gareth Jones

Our Standards:The Thomson Reuters Trust Principles.

The Main Differences Between Forex and Crypto Trading - The Daily Hodl

Posted: 01 Apr 2019 08:40 PM PDT

Crypto trading is often thought of as similar to Forex, or foreign exchange trading. Forex, like crypto, involves trading currencies. However, there are a few key differences between the two. Forex trading is a large, well-established practice, while crypto trading is a relative newcomer to the scene. Forex often involves middlemen, brokers, and other institutions that take fees at every step of the trading process. The lack of a middleman is one of the biggest draws of crypto trading. And another major sticking point between the two is the liquidity available in Forex, versus the lack of liquidity in crypto – once you move away from the most common coins. And of course, there's security.

Let's take a look at the differences between the two in detail.

Swiss Francs vs. Bitcoin

Forex trading is large. The average daily turnover rate for Forex is in the trillions, with $5 trillion USD being traded in Forex in 2016. Compared to that, the most significant coin in crypto, Bitcoin, had only $1 billion USD turnover. BTC trading is not even as large as Forex trading in the Swiss franc, responsible for 5% of trading volume and $243 billion USD in daily turnover. However, unlike Forex, crypto trading can show returns of over 70%. Returns that high are almost unheard of in Forex trading.

Since Forex trading is so established, it is a regulated and mature market. This means that middlemen are everywhere in the Forex world. From brokers to exchanges, and other hidden fees and costs, Forex trading can get expensive, even before a trader has turned a dollar in profit. This means that Forex traders need to have pretty substantial capital also before they can trade. Institutional involvement is another significant aspect of Forex trading. Unlike crypto, Forex traders are competing with established banks, high-frequency traders, and other specialized firms. This institutional involvement can make it difficult to compete.

Stability and Volatility

Forex also lacks the same volatility present in crypto, making it hard to take advantages of small differences in exchange rates. However, this comes with the benefit of easily available liquidity. In other words, it's pretty easy to trade any given currency for another, like trading US dollars for Nigerian naira. Orders like that tend to be filled nearly instantly. Because Forex has such high daily turnover, there are a lot of pairs that exist even if they're otherwise minor currencies. Forex's liquidity also ensures that even large trades won't overly change the asking price of a given trade. For crypto trading, large trades often have a huge impact on price.

While crypto's price can shift for big orders, especially when dealing with altcoins and lesser-known tokens, it has almost no barriers to entry. It's incredibly easy to start trading crypto, and many online platforms allow users to jump in and begin trading practically instantly. The fees are usually much less than Forex fees, and the lack of a middleman means that there are no hidden costs. Crypto volatility also says that large, daily swings are possible and common, meaning that it's a lot easier to buy in low in the morning, and sell high in the evening.

Security and Regulation

There is one more major difference between the two. That difference is security. Cryptocurrencies are a comparatively new technology, with all the risks associated with emerging tech. There are mountains of stories in the news about cryptocurrencies being hacked, stolen, or simply lost due to glitches. Due to the immutable nature of the blockchain, such actions are incredibly difficult to reverse, though not impossible.

There are also very little to no regulations surrounding crypto trading. This can leave traders open to scams and fraudulent behavior with no method of recourse. Having your funds hacked and stolen is not a pleasant experience – even less when there's no real way to get that money back. Forex trades often carry some level of protection, and brokerage accounts are usually insured by the government in the event of theft or fraud.

Which Is Better?

Both Forex trading and crypto trading carry their own pros and cons and their own risks and rewards. Generally speaking, Forex trading is more stable, more protected, and highly regulated. Crypto trading carries the promise of much larger returns than Forex, at the cost of the stability of Forex. This means that smart and skilled traders with a large appetite for risk can realize much higher profits in crypto than they could in Forex trading, while not dealing with the same institutional involvement.

The two markets are similar, but only in the sense that they are both electronic trading forms of currency. The liquidity of Forex versus the volatility of crypto means that traders will need entirely different trading strategies for the two.

Source: www.monfex.com

This content is sponsored and should be regarded as promotional material. Opinions and statements expressed herein are those of the author and do not reflect the opinions of The Daily Hodl. The Daily Hodl is not a subsidiary of or owned by any ICOs, blockchain startups or companies that advertise on our platform. Investors should do their due diligence before making any high-risk investments in any ICOs, blockchain startups or cryptocurrencies. Please be advised that your investments are at your own risk, and any losses you may incur are your responsibility.

The pound's volatility due to Brexit is a headache for FX traders - Quartz

Posted: 01 Apr 2019 07:46 AM PDT

Charlie Burton is a UK-based foreign exchange trader, but he's keeping the British pound at arm's length.

"In recent months, I've not traded it. I've avoided it," he says. "The moves that are in the pound can be so erratic. It's at the mercy of the slightest piece of news in relation to Brexit. To me, as a trader, why do I want to be in positions on a currency pair where it feels like there are things going on which are outside of your control?"

Burton, who has run his own company for the past 17 years, is far from unusual. In markets as diverse as high-end art, London property, and fresh flowers, Brexit's looming shadow is sending all but the blithest of buyers scurrying away. "I was down at my brokers in Canary Wharf just last week," Burton says. "They were saying that they're seeing lower volumes across the board."

The value of the pound has been the most direct, immediate way to gauge market sentiment towards Brexit. In general, any development that suggests a continued close relationship with the EU results in a boost to the pound, while anything that signals prolonged uncertainty or a "no-deal Brexit" sinks the value of sterling. At the start of this year, currency transfer company TransferWise introduced a £10,000 limit on cash going in and out of the UK, citing a "higher likelihood of exchange rate volatility" potentially leaving it exposed.

With the current deadline for the UK deciding on something (including a no-deal Brexit) set for April 12, the British parliament remains gridlocked. Although a recent rise in the pound seems to reflect some faith in a softer Brexit option, the risk of a shock no-deal outcome remains in place.

As with the original Brexit vote, market conditions seem to be operating under the impression that crashing out of the EU won't happen. Speaking to CNBC, Rabobank's Head of FX Strategy, Jane Foley, suggested that traders are optimistic about a soft or even no Brexit outcome. "I don't know if it's because London is a 'remain' city or if perhaps because many traders are European, but the way sterling has traded all the way back to 2016 has shown a definite bias," she told the broadcaster. Recent trading suggested to her "a lot more good news… baked into the price than bad news."

There's a troubling precedent here: when the UK voted to leave the EU in 2016, it took markets by surprise, sending the pound plummeting to its lowest point against the dollar in 31 years. In the 1,000 or so days since the referendum, the pound has made a partial recovery, though another historic tumble is still a distinct and decidedly spooky possibility. "[Brexit] has weighed on the pound," says DailyFX foreign-exchange analyst Nick Cawley. "It's also kept international investors, longer-term investors, pension funds, things like that, who would usually invest in the UK as a top-class credit, to the sidelines."

But individual traders, Burton says, may be "attracted to the excitement" of a choppy market. This is his warning to them:

You have to always think: what if we all of a sudden get one of those moves like we had in 2016? You're not going to be to protect yourself from that and all of a sudden, can you afford to take a big move like that against you? But don't get me wrong: there are always going to be your gamblers out there who will be thinking, "well, this is great fun."

Giving the pound a pass is "perfectly reasonable," Cawley says, at least until the finer points of Brexit are resolved (whenever that is). "When politics and finance collide, there's always a bit of a mess," he says.

RPT-GRAPHIC-Forex traders fret as sleepy markets slow to calmest in years - Reuters

Posted: 02 Apr 2019 12:01 AM PDT

(Repeats Monday story, no changes to text)

* 2019 Q1 sees lowest FX vol since 2014

* Euro/dollar has narrowest range on record

* Expectations for vol pick-up not encouraging

By Tommy Wilkes and Ritvik Carvalho

LONDON, April 1 (Reuters) - The $5.1-trillion-a-day foreign exchange market is suffering more than most from central bank decisions to move in tandem and keep interest rates low for longer.