How Could The Forex industry Change in 2021?

The year 2020 and the COVID-19 pandemic have been a challenge for many industries, including the forex industry. In the next couple of months, exchange rates are going to depend on how fast confidence is renewed as we all look to recover from a global pandemic, though aggressive monetary and fiscal policy support packages from the banks and governments have been helpful. However, it is important to remember that the forex industry was also impacted by the US protectionist policies even before the pandemic.

Now the US dollar is expected to decline about eight to ten percent from current levels against many currencies, but because of the COVID-19 pandemic, it may not be as simple as you think.

Forex trading in the post-COVID era
photo credit: Nataliya Vaitkevich / Pexels

Many experts and analysts believe that it is now a good time to enter the forex markets as an investor or a trader. The market could offer many opportunities to the traders to make profits in the coming months. If you are thinking about starting your forex trading journey, remember to take a look at reputable brokers that allow US citizens to trade currencies online in order to avoid scams and frauds. Take some time out to read about the best options available in the forex industry.

If we can correctly predict how the forex market might be looking in the near future, we can make our trading decisions based on that information and make profits. Now, let’s discuss how the forex markets might be looking in the future.

More opportunities as economies return to pre-pandemic levels

A lot of forex brokers are shifting towards promoting the self-employed remote workforce through forex sign-up offers. This could lead to individual investments and an increase in the number of trading professionals who will be self-taught. As they might not want to trust large banks with their investments, these individuals will help the forex industry grow.

In many countries, policymakers are now working on returning economies to pre-pandemic levels and dealing with the impact of deflation. In the UK, Brexit will provide support to the GBP. Scandinavian currencies could be the first to recover. It is worth noting that CZK (Czech Koruna) could be ready as it is backed by one of the few central banks.

We can also expect to see an increase in commodity prices in the next couple of months. Canada’s expected recovery in oil prices could prove to be good news for the forex industry. NZD and AUD are also expected to do well if supported. Many experts favor the COP (Colombian Peso) because it is backed by relatively stable politics. The KRW (Korean Won) is already doing very well.

Trader analyzing forex market

Forex markets

There are a number of currencies that stand stronger against the dollar as they have completely reversed their losses, for example, CNY, EUR, and KRW. On the other hand, many emerging currencies are still suffering because of the collapse in commodity prices. These currencies are struggling with fiscal challenges or balance of payments, for example, ZAR and TRY.

As we have mentioned above, policymakers around the world are working to achieve reflation. This could mean that the dollar is going to weaken. As long as the pandemic doesn’t get out of control, the 10 year US Treasury yield at one percent or even 1.25 percent could provide a fair investment environment.

Carry trades

It is expected that carry trades are going to be very popular. This is a trading strategy where you invest in an asset that offers a higher rate of return but it also involves borrowing at a low-interest rate. This could mean low levels of volatility in the forex market. The emerging currencies in the market could also have the highest real interest rates.