Five Current Trends For Global Markets Divisions (FX)

Five Current Trends For Global Markets Divisions (FX)

Towards the end of last year, we all sat around the “virtual” round table theorising how the world of banking must have been radically changed for Forex trading teams in 2020, where the usual ‘trading norms’ no longer applied. So, why are we proposing a completely unknown hypothesis and why didn’t we to the global marketplace and ask the members at the coalface, so to speak. What did they really thought about the changing financial climate, particularly in regard to the Forex sector over the next twelve months.

Consequently, over December 2020 and January 2021 we were fortunate to hold discussions with some of the leading bankers in the UK, Europe and the USA. If you happen to be one of the innumerable bankers we talked to - we are extremely indebted for the interesting perceptions we gained from you.

Our survey was not attempting to provide statistical analysis, but aimed at providing some insights into the current situation from the collective responses and underlying concepts the Forex industry sector provided us.

What we found really interesting was the general agreement on what has changed and the things that will continue to challenge global markets in the year ahead. Given the diverse assortment of banks and their mix of locations, their answers about the situation and forecast were outstandingly similar regardless of their geographic location.

Global Markets Divisions Survey

While trading volumes undeniably varied widely across banks, surveyees reported a general increase in short-dated small trades. Customers were, by and large, making faster decisions but with a lower appetite for risk.

Businesses are holding a lot of cash at the moment (many drew down business loans and banked them straight away). This indicates a low-risk appetite, and a lot less demand for - “long-dated forwards.”

BAU disruption

The two common threads of concern around client disruption related to the rupturing of supply chains and the difficulties in being able to forecast ahead. There was real sympathy for the situations clients found themselves in – as one interviewee put it:

“It can be tough talking to business owners whose very livelihoods and existence are on the line.”

Client communication

One of the biggest changes we found related to customer communication. Across the board, the global market people we spoke to noted there was more demand for effective online engagement. This also underlined the need for greater focus on creating a more helpful online customer experience including self-service options. Respondents reported an acceleration in digitisation and as one manager noted:

“The bank is going to have to work very hard to meet these new user experience expectations.”

Industry themes for 2021

Finally, we asked if there were any key themes emerging for the coming year - these four stood out:

1. Removing friction – increasing automated trades based on co-developed treasury policies.

2. Relationship versus price – a focus on building strong customer relationships will win out overpricing.

3. Appetite to invest in tech – an increased appetite as indicated in the first two themes. Whilst we are pleased to see this trend, there was an adjunct, an assumption that the banks have a finite tech budget which is hotly contested.

4. Industry acquisitions – the increased possibility of FinTech acquisitions by Banks and the rationalisation of the market.

Consequently, there are some very interesting insights that will continue to affirm our understanding of the challenges facing Forex sales and trading teams - as well as their priorities for the expected difficult year ahead.