As we transition out of 2023, the forex market is subject to a wide range of factors and influences. So, what’s coming on the horizon? In this article, we’ll share five forex trends to watch in 2024.
Market volatility will return
Synchronised monetary policies caused forex market volatility to decrease unexpectedly during 2023. Yet you shouldn’t expect this to be the case for 2024. Some banks are poised to ease their monetary policies. Some are maintaining a pause, such as the Fed. And some are even contemplating tightening their policies, like the Bank of Japan. Therefore, we can expect volatility to increase during 2024.
Funded trading is on the rise
In 2024, we can expect to see new forms of trading disrupt the industry, including funded trading. Funded trading platforms provide affiliates with capital so they can make trades without risking their own money, in exchange for a share of the profits. This gives traders with extensive knowledge but limited funds the opportunity to make a fortune compared to on their own, without jumping through hoops on wall street.
The dollar will slow down
The greenback will likely slip this year. Yet contrary to what many people believe, the dollar isn’t likely to depreciate in 2024. Even if the US economy were to slow down, it’s doing well enough that there’s no significant probability of a recession taking place. This economic strength is mainly due to resilient domestic consumption even despite high inflation, as well as a strong housing market.
Emerging currencies could be popular
Towards the end of 2023, emerging currencies became increasingly attractive to traders. And they’re likely to remain so in 2024. With many currencies from major developed countries seeming more vulnerable, it’s no surprise when investors look for new markets to trade. Yet not all emerging economies are equal. Countries with low inflation, reduced interest rates and undervalued currencies like Chile and Brazil likely offer the best opportunities.
A fresh energy crisis could emerge
2024 could see a resurgence in challenges around energy, due to a mix of structural factors. These include traditional challenges such as supply shortages and insufficient infrastructure investment, as well as mounting pressure to end oil production. As countries around the world attempt to move away from fossil fuels, the currencies of oil-producing countries like the United States, Saudi Arabia, and Russia may face new and unexpected pressures.
Sterling will struggle
The British pound went for a rollercoaster ride in 2023, and its outlook is gloomy for 2024. The UK faces many challenges, including modest economic growth, restrictive monetary policy and a labour shortage caused by Brexit and COVID – not to mention high inflation and the looming threat of a stagnation scenario. Currency performance in 2024 will be significantly determined by the scale and timing of central bank cuts, so the pound could struggle significantly should the Bank of England cut before its major peers.
Which of these forex trends will you be keeping an eye on in 2024?
