2015 was a really big year for the FX trading market. Rapid changes in financial policies contributed to strong moves in major currencies and the US dollar was the peak performer as usual. Additionally, the US experienced the first ever rate hike in more than a decade while the top banks in the EU, Canada, China, New Zealand and Australia actually eased. The greenback reached new highs and this in turn weakened the other major currencies. So how exactly the Forex market will look like in whatever is left of the current financial year? Here’s taking a look.
The biggest risk that the foreign currency trading market is going to face in 2016 is the feedback loop from the Fed policy and dollar. The first few months have been quite easygoing for the US dollars. However, there’s more to it than the stronger dollar and the recent rate hikes in the US. Here are the top Forex signals for 2016.
Financial policy gaps are likely to narrow in the second half the current year. As the Fed continues to reduce accommodation, it will remain the only major central bank hiking interest rate for most of the time this year. Keep in mind that slow growth, significantly low commodity prices and low external demand would hit many economies this year. However, additional easing will be quite high in most of the countries. The dollar strength will eventually abate through this year.
Weak global demand and a strong dollar collapsed oil prices last year and the prices would fall further as the US government has lifted its 40-year ban on all oil exports. On the other hand, China has re-focused on domestic demands, which is a positive sign overall for energy prices. Lifting inflation is the biggest challenge for many banks and the strong dollar would create disinflationary pressure and the prices will be lowered eventually.
Diminishing stock market returns is another thing that would happen in latter part of the year. The easy money is finally coming to an end and the strong dollar, coupled with tightened Fed policies, would take a big share of corporate profits. So what should we expect from the FX market this 2016? At the very best, you can expect single digit gains in the earnings growth curve. Earnings and stocks are going to suffer more due to the slow global economic growth and lowered community prices.
Politics will certainly put economics in the shade this year. With the UK referendum coming up next, the continued refugee crisis in the Eurozone and the economic slowdown in Russia and of course the increased aggression of the ISIS would surely affect the money markets. However, if you can stick to the basics of Forex trading, you can still ensure large profits. Taking calculated risks and constant analysis of the money market trends is the key to successful trading. Do not forget that trend is the biggest friend of a Forex trader.
If you are all set to trade Forex, do not forget getting the tips and insights from CMC Markets, one of the leading spread betting and CFD trading provider in the UK.