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2024 Forex Market Insights

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Read Time: 8 Minutes


Throughout the year of 2024, we’ve observed some significant economic shifts and global events that have influenced market movements in their own way. Central bank policies were front and centre, with the Federal Reserve, European Central Bank, and Bank of Japan steering market sentiment through interest rate decisions and inflation management.


Geopolitical events further intensified market volatility, from the U.S. presidential election to regional conflicts and global trade renegotiations. These developments highlighted the forex market's sensitivity to political transitions and international agreements – providing some great trading opportunities along the way, on the back of the resulting volatility.


There were talks of central bank digital currencies (CBDCs) and the integration of AI-driven trading tools, which brought us both opportunities and challenges, fundamentally altering how traders approach the market.


Economic indicators like inflation trends, employment data, and GDP growth provided critical insights into currency dynamics, while liquidity patterns and institutional trading flows shaped the forex market 2024 behaviour.


Table of Contents


Central Banks & Economic Indicators


Economic indicators continued to determine forex market 2024 movements. Inflation trends, employment data, and GDP growth became focus points for traders in their market analysis. However, central banks were the driving forces behind many of 2024’s forex movements. One of the key influencers being the Federal Reserve (FED), which continued to balance inflation management with economic growth. Its policy decisions caused notable fluctuations in the dollar index.


In Europe, the European Central Bank (ECB) adopted a measured approach, focusing on stabilising the eurozone whilst observing varying economic growth rates. Its quantitative easing measures influenced liquidity trends and regional currency movements.


Across the Atlantic, the Bank of England faced challenges as the UK’s post-Brexit economy dealt with a persistent level of inflation.


The Bank of Japan remained committed to ultra-loose monetary policies, maintaining pressure on the yen – of which was a prime contender in the carry-trade space. Meanwhile, several emerging economies grappled with inflationary spikes, prompting central banks in countries such as Brazil and India to tighten policies.


Inflation remained a dominant theme, with central banks in developed and emerging markets adjusting their policies to manage rising prices. The U.S. inflation rate, in particular, was a critical driver of Fed decisions, indirectly shaping the dollar's global standing.


Whilst the U.S. demonstrated moderate growth, China’s slower-than-expected recovery impacted commodity-linked currencies like AUD and CAD. In addition, trade balance data highlighted the fragile state of international trade, further complicating currency dynamics.



Geopolitical Influencers



One of the year's most impactful events was the U.S. presidential election, which drove volatility across global markets. Policy discussions on trade agreements and economic reforms led to fluctuations in the USD, particularly against currencies like the euro and yen. With President Donald Trump still in the process of taking office, we can expect to see further geopolitical developments and forex price movements as we head into 2025.


Regional conflicts and political transitions also applied pressure on currencies. A key one being the tensions in Eastern Europe which influenced the euro's trajectory, whilst political instability in the Middle East affected oil-exporting nations' currencies such as the Russian Ruble and Canadian Dollar. In addition to this, trade agreements, such as renegotiations between key Asia-Pacific economies, created ripple effects in commodity-linked currencies like the Australian and Canadian dollars.



Forex Market 2024 – Behaviour Analysis



The forex market 2024 exhibited unique behavioural trends, characterised by pronounced volatility and evolving liquidity patterns. Traders observed spikes in volatility following key central bank announcements and geopolitical events, which created both challenges and opportunities.


Liquidity trends shifted significantly, with institutional trading flows dominating high-volume trading periods. Cross-border capital movements also surged, driven by divergent economic recoveries among regions. For instance, the U.S. attracted significant foreign investment due to its relatively stable economic outlook, bolstering the dollar’s strength against other major currencies.


Technological advancements further influenced market behaviour. AI-driven trading platforms improved trade execution efficiency, while blockchain technology introduced greater transparency in cross-border transactions. The digital currency evolution has added another layer of complexity, as traders adapted to the increasing integration of CBDCs into mainstream markets.


These behavioural insights reveal the dynamic nature of the forex market in 2024, emphasising the need for traders to remain agile and leverage advanced tools for navigating this ever-changing landscape.



A Technical Recap


In addition to observing the fundamental influencers of 2024, we can put it all into context by observing the daily chart for the year.

  

DXY 


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EURUSD

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As expected, the US Dollar movements were inversely correlated with the EURUSD reaching a high of 1.12140 and a low of 1.03332. 



AUD & NZD 


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Our Aussie dollar has provided some fantastic trading opportunities this year – with range-bound strategies taking advantage of Q1 & Q2, before trend-following strategies amplified those returns with the increased volatility in Q3 & Q4, resulting in a high of 0.69424 for the year, and a low of 0.63482. 

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Across the ditch, the Kiwi Dollar has performed very similarly, with a high of 0.63788 and low of 0.57971. 



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GBP


The trend was your friend for the GBP this year – providing a long-term bullish trend, before reversing to a now-downward trend. A prior low for the year at 1.22996 was met with a resulting high of 1.34342 at the conclusion of the bullish trend. 




CHF &  JPY

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Love it or hate it, the Swiss Franc was a trend traders’ dream this year, with a bullish trend providing a high of 0.92244, followed by a resulting down trend reaching a low of 0.83744.

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We all know the story with the Yen this year, including multiple instances of intervention by the BoJ. Whether you’re taking advantage of the carry trade, or simply riding the trend, we saw textbook trending reaching a high of 161.951 and a low of 139.579 for the year. 




Conclusion – Lessons From 2024


The 2024 forex market has been a year of developments, from central bank policies, economic indicators, geopolitical events, to technological advancements...


Disclaimer: Economic conditions are complex and rapidly evolving. This overview provides an educational perspective based on available information as of late 2024.

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Relevant articles

Market Analysis
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How Global Interest Rate Divergence Is Shaping Forex Opportunities in 2025

Read Time: 12 minutes


Central banks around the world are no longer moving in tandem. In 2025 we see a clear interest rate divergence: some economies are cutting interest rates to support growth while others keep rates high or even hike them.


For forex traders, these policy differences are a big deal. They create shifts in currency values and fresh trading opportunities.


This article breaks down what interest rate divergence means, why it matters for FX, how major central banks like the Fed, ECB, RBA, and RBNZ are charting different paths this year, and what it all means for currency pairs like NZD/USD, AUD/USD, AUD/NZD, and EUR/USD.



Table of Contents



What Is Interest Rate Divergence (and Why Traders Care)


"Interest rate divergence" simply means central banks are going in different directions with their monetary policy. One bank might be raising or holding rates, while another is cutting rates.


These differences matter because interest rates heavily influence currency demand. In general, higher interest rates tend to attract foreign capital seeking better returns, boosting demand for that currency and causing it to appreciate, while lower rates can have the opposite effect.


For example, if New Zealand's interest rates fall well below U.S. rates, holding money in NZ dollars becomes less attractive relative to U.S. dollars. Traders respond by moving capital accordingly – a dynamic that shifts exchange rates.


Diverging interest rates can also spur carry trades (borrowing in a low-rate currency to invest in a high-rate one), further strengthening high-yield currencies.


Diverging Central Bank Paths in 2025


The start of 2025 has made one thing clear: the world's major central banks are not on the same page. Economic conditions vary across regions, so policymakers have taken different monetary paths – from aggressive easing to cautious pauses and even tightening.


According to Reuters, early 2025 saw the United States holding rates steady, the euro zone cutting rates, and outlier Japan hiking – a sharp change from 2024 when most banks were easing in unison.


Let's look at the distinct approaches of four key central banks and the reasons behind them:



Federal Reserve (USA) – Cautious Hold at High Rates


The U.S. Federal Reserve (Fed) entered 2025 with interest rates at multi-year highs and has opted to hold them steady for now.


After a series of rate hikes in 2022–2023 to fight inflation (and a few modest cuts in late 2024), the Fed's benchmark rate is sitting around 4.25%-4.50%.


Fed Chair Jerome Powell has signalled no rush to cut rates again until inflation is convincingly back to target and the labour market cools.


The U.S. economy has remained surprisingly strong, with solid growth and only "somewhat elevated" inflation, so the Fed is being very cautious about easing policy too quickly.


In December, Fed officials even revised their forecasts, indicating they expect only two small rate cuts in 2025 (down from four expected earlier).


By keeping U.S. rates high relative to others, the Fed is supporting the dollar's value – a point we'll see reflected in currency moves like EUR/USD.




European Central Bank (Eurozone) – Pivoting to Rate Cuts


Across the Atlantic, the European Central Bank (ECB) is taking the opposite route.


With eurozone inflation finally coming under control (somewhat) and growth fading, the ECB has pivoted to cutting rates in order to strengthen the economy.


They cut in late January, by 25 basis points – its fifth consecutive cut since mid-2024. This, in turn, brought the deposit rate down to about 2.75%.


Notably though, ECB policymakers have kept more easing on the table, reflecting confidence that euro-area inflation is headed firmly toward the 2% target.


In fact, markets have been pricing in multiple further ECB cuts in 2025 (around three more 0.25% reductions) as the eurozone economy struggles to gain some momentum.



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Figure: Change in policy rates by major central banks (Mar 2024 vs Feb 2025). Orange dots indicate central banks (like New Zealand, Canada, Eurozone, etc.) that have cut rates; yellow shows those that held steady (e.g. the U.S. Fed), and purple indicates rate hikes (e.g. Japan). Diverging policies are evident, with the RBNZ and ECB easing while the Fed stands pat and the Bank of Japan tightens.



Actionable Ideas for 2025


Global interest rate divergence has become a defining theme for forex in 2025. The Fed and RBA are cautiously standing pat or easing only slightly, whilst the ECB and RBNZ are more aggressively cutting rates to combat economic weakness.


These divergent paths have shifted interest rate differentials, in turn driving notable moves in FX markets – a stronger U.S. dollar relative to the euro, Aussie, and Kiwi; a surging AUD against a soft NZD; and other carry trade dynamics playing out.


Follow Central Bank Signals:

Keep a close eye on central bank meetings, statements, and economic data. A hawkish comment from the Fed or a dovish surprise from the RBA/ECB can quickly alter currency movements.


Trade the Differentials (Carry Trades with Caution):

Divergent rate policies mean some currencies offer higher yields than others. Traders can seek opportunities by going long currencies with higher or rising rates and shorting those with falling rates, effectively capturing the interest differential.



Conclusion


Global interest rate divergence is reshaping forex markets in 2025, creating clear winners and losers among currencies.


By understanding each central bank's policy trajectory and its impact on currency pair interest differentials, even beginner and intermediate traders can better navigate the trends.


Keep an eye on the data and use this knowledge to make informed trading decisions.


Whether you're capitalising on USD strength, taking a carry trade, or managing risk on a volatile EUR/USD, the key is to align your strategies with the underlying interest rate story.


As always, combine fundamental insights with sound risk management. Interest rate divergence is offering opportunities – and with the right approach, forex traders in 2025 can position themselves to take advantage of these global shifts in monetary policy.

02/04/2025
Market Analysis
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Strategic View: Planning For 2025

Read Time: 7 - 9 Minutes.


There’s already been some fantastic volatility in the forex market this year – mainly attributed to Trump, but also ongoing discussions around monetary policy in key economies. 


Even if you’re a short-term trader, it’s important to look ahead and form a strategy for the year. There’s currently a convergence of high U.S. real yields, central bank policies, and geopolitical risks that all traders need to keep on their radar. 


In this post, we will discuss the current themes for 2025, as well as identify ways in which we could capitalise on them. 


 

  1. The U.S. Dollar’s Strength and Global FX Implications 

The dominant theme in the FX market this year is the continued strength of the U.S. dollar (USD), fuelled by not only by Trump, but also high real interest rates and economic divergences.


Following what’s called the "red sweep" in the 2024 U.S. elections, markets have shifted expectations towards persistent USD strength in the first half of the year​. 


There’s several factors contributing to this trend: 


  • High U.S. Real Yields: Elevated interest rates in the U.S. continue to attract capital inflows, ultimately reinforcing the greenback’s strength. 

  • Diverging Monetary Policies: Whilst the Federal Reserve remains cautious about rate cuts, the European Central Bank (ECB) and Bank of Japan (BOJ) are expected to ease policy further. 

  • Tariff Risks and Trade Policies: Anyone watching the headlines would be aware of Trump’s recent rampage on tariffs – these new tariffs could further support the USD by dampening foreign currency demand. 

Volatility Strategies will be the play here, with policy uncertainty and trade negotiations in the air, options-based strategies such as straddles or volatility swaps on USD pairs could become very attractive. 

 

2. Carry Trade Opportunities in High-Yielding Currencies 


With real interest rate differentials widening, carry trades remain a key theme in 2025. The market is favouring currencies with strong yield advantages, such as the U.S. dollar and select emerging market (EM) currencies. 


Key High-Yield Currencies: 

  • USD: The dollar’s rate advantage makes it a prime funding currency. 

  • CAD: Despite trade risks, Canada’s interest rate environment remains somewhat supportive. 

  • NOK: The Norwegian Krone has shown improved carry appeal, as a result of Norges Bank resisting an aggressive approach to rate cuts​. 



Trading Strategies: 

  • Long USD/MXN or USD/ZAR: With emerging market currencies under pressure due to trade risks and high U.S. rates, going long USD against the Mexican Peso (MXN) and South African Rand (ZAR) could prove to be profitable. 

  • Short CHF or JPY in Carry Trades: Both the Swiss Franc and Japanese Yen are likely to underperform against high-yielding currencies due to negative real rates​. This could provide some attractive carry trade opportunities. 

  • NOK/SEK Call Spread: As Norway’s interest rate stance is firmer than Sweden’s, NOK/SEK longs could offer potential upside​. 

 


3. The Euro’s Structural Weakness and Political Uncertainty 


The euro (EUR) remains vulnerable this year due to a combination of economic underperformance and political instability. 


Key Risks for the EUR: 

  • Interest Rate Divergence: The ECB is expected to continue cutting rates, whereas the Fed remains on hold, for now. 

  • Trade War Exposure: Europe is a primary target for new U.S. tariffs, which could add to the weakening of the Euro. 

  • German and French Political Uncertainty: Domestic political risks, including German elections and policy uncertainty in France, add further downside pressure to the euro​. 



Trade Idea: 


Short EUR/JPY 


A graph of a stock market AI-generated content may be incorrect. 

Figure 1 – EURJPY Weekly Chart 


Given Japan’s relatively stable policy outlook and Europe’s tariff risk, going short EUR/JPY remains a key trade. 



Long EUR Volatility 


A graph of a graph AI-generated content may be incorrect. 

Figure 2 – Euro Volatility Index, daily chart 


For options traders, the euro’s downside risks make long volatility positions an attractive hedge against geopolitical shocks. 

 


4. Commodity Currencies 


Commodity-linked currencies such as the Australian Dollar, Canadian Dollar, and Norwegian Krone face some unique opportunities in 2025. 



The Oil Market’s Influence on FX 


Analysts are expecting crude oil markets to remain tight, with OPEC aiming to balance the supply and demand​. In doing so, this could lend support to oil-linked currencies such as CAD and NOK, provided that global demand remains resilient. 

Gold and Safe-Haven Flows 




A graph showing the price of a stock market AI-generated content may be incorrect. 

Figure 3 – XAUUSD (gold), daily chart 




Gold prices have surged in early 2025 – driven by fears of tariffs, geopolitical tensions, and central bank buying​. Whilst this supports the Australian Dollar to some extent, rising U.S. yields could ultimately cap AUD/USD upside. 



Trade Ideas: 

  • Long USD/CAD on Tariff Risks: The potential for broad U.S. tariffs on Canada could weaken the CAD, making long USD/CAD a defensive play over the long-term, especially given the bullish strength of the USD. 

  • Long Gold as a Hedge: With tariff risks escalating, gold remains a strong hedge opportunity against geopolitical uncertainty. 

 



5. Geopolitical Crossroads and FX Volatility 


Beyond macroeconomic fundamentals, geopolitical risks continue to hold the FX market at ransom in 2025. There’s potential for volatility to stem from: 


  • U.S.-China Trade Tensions: Renewed tensions from Trump could weigh on the Chinese Yuan (CNY) and ultimately spill over to other Asian FX markets, such as the AUD and NZD​. 

  • European Political Shocks: Elections in Germany and France could provide sharp moves in the EUR. 

  • Middle East and Energy Market Risks: Any disruptions to oil supply chains would adversely affect energy-linked currencies, such as the CAD. 

Trade Idea: 


Long USD/CNH 


A line graph with black and purple lines AI-generated content may be incorrect. 

Figure 4 – USDCNH, weekly chart 



Continued pressure on the Chinese economy and potential U.S. tariffs could push USD/CNH higher​. It would be wise to look for long opportunities above 7.375. 

 



Final Thoughts 


As we take on 2025, having an understanding of the key macroeconomic drivers, central bank policies, and geopolitical risks is no longer ideal, but necessary. 


  • USD strength remains a dominant theme, with potential for reversals in Q3 & Q4 this year.. providing that the Fed pivots. 

  • Carry trade opportunities favour high-yielding currencies, whilst funding currencies like JPY and CHF face ongoing pressure. 

  • The euro still remains vulnerable as a result of policy divergences and political uncertainty. 

  • Commodity currencies require a more careful approach – with CAD and NOK benefiting from oil strength, whilst AUD could be exposed to further downside risks. 

  • Geopolitical tensions add more ammunition to FX volatility – with the potential to either create more trading opportunities, or disrupt market structure.  


By keeping these key themes in mind, we’re able to form a more structured approach to 2025. Whilst there’s been some appealing moves in the market so far, there’s still plenty of room for trend changes and unexpected volatility. The key going forward is to stick to your trading plan, but expect the unexpected – especially as we begin to see the economic effects of Trumps’ executive orders. 


If you haven’t done so already, check out our post on Economic Indicators here. 


20/02/2025
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