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Introducing Six New Base Currencies for Forex Traders

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Estimated Read Time: 15 minutes 

In an era where global markets are constantly evolving, adaptability and innovation have become the cornerstones of success. With this ethos in mind, we are pleased to announce the introduction of six new base currencies by Fusion Markets. Embracing the diversity of international finance, we are now offering traders the opportunity to engage with the Norwegian Krone (NOK), Swedish krona (SEK), Czech koruna (CZK), Hungarian forint (HUF), Swiss franc (CHF), and Danish Krone (DKK) as base currencies. 


Key Points:  

  • Fusion Markets has added six new base currencies: Norwegian Krone (NOK), Swedish Krona (SEK), Czech Koruna (CZK), Hungarian Forint (HUF), Swiss Franc (CHF), and Danish Krone (DKK). 

  • These additions aim to provide traders with more flexibility and access to a broader range of currency pairs. 

  • Each currency has a unique history and plays a significant role in its respective country's economy. 

  • The new base currencies offer opportunities for portfolio diversification and exposure to different economic regions. 

  • Traders can benefit from Fusion Markets' low commissions, zero minimum deposit, and access to multiple trading platforms. 

  • Understanding the correlations between these currencies and major global currencies is crucial for effective trading strategies. 

  • The introduction of these base currencies reflects the evolving nature of the global forex market and the importance of adapting to new opportunities.



Table of Contents

This expansion marks a significant milestone in our commitment to empowering traders with enhanced flexibility and access to a broader range of currency pairs. As the forex landscape continues to evolve, it is essential for traders to have access to a comprehensive selection of base currencies to navigate the ever-changing trends of the global economy. Let's explore their history, unique characteristics, roles, and correlations within the global financial ecosystem.

By registering with Fusion Markets, you will get access to: 

  • $0 minimum deposit 

  • No minimum account size 

  • White glove customer support 

  • Range of markets (including Forex and our new base currencies) 

  • TradingView, MetaTrader 4, MetaTrader 5, cTrader 

 

TRADE NOW 


Norwegian Krone (NOK)


The Norwegian Krone, denoted by the symbol "kr" and the currency code NOK, has been in circulation since 1875 when Norway joined the Scandinavian Monetary Union. Like many currencies, the Krone is subdivided into smaller units, known as øre, with 100 øre equaling 1 Krone. While Norway initially pegged its currency to gold, it later adopted a floating exchange rate regime, allowing market forces to determine its value. 

 

Historical Background of the Norwegian Krone 


The initial introduction of the krone occurred in 1875 as it replaced the speciedaler. At that time, the exchange rate was set at four kroner for one speciedaler. Subsequently, Norway became a part of the Scandinavian Monetary Union, a coalition that remained in existence until the outbreak of World War I. Throughout the Union's existence, the Norwegian krone adhered to the gold standard until 1931 when it was pegged to the British pound. 


In 1939, Norway's currency was linked to the U.S. dollar (USD). However, during the German occupation of Norway in World War II, it was tied to the Reichsmark. Following the war's conclusion, the currency was once again pegged, this time to the British pound (GBP). Shortly afterward, the krone's peg shifted to the US dollar until 1971 when it was allowed to float freely in the market for seven years before being linked to a basket of currencies. Then, in 1992, the central bank opted to move away from a fixed exchange rate system, enabling the currency to float based on foreign exchange rates. 

 

Correlations of the NOK 


The Norwegian krone ranks as the 14th most traded currency globally by value and exhibits a strong correlation with other currencies. Its value against major counterparts such as the US dollar and euro experiences significant fluctuations from year to year, primarily influenced by shifts in interest rates and global oil prices. 


Even long after the dissolution of the Scandinavian Monetary Union, the Krone maintains a notable correlation with the Danish krone and the Swedish krona. Conversely, its correlation with currencies like the British pound, euro, Canadian dollar, and others tied to oil prices remains comparatively low. Notably, some establishments in Oslo, Norway’s capital city, accept payments in US dollars or euros for goods and services. 


As a prominent oil exporter in Western Europe, Norway derives a substantial portion of its budget from oil revenues. Consequently, the value of the krone is closely intertwined with fluctuations in crude oil prices, reflecting trends in the global oil market. 


For instance, during the oil crisis of 2015, the krone depreciated by 20% against the dollar, marking its lowest level in a five-month period from October 2014 to February 2015. To learn more about other top Forex events in the new millennium, visit our blog. 



Swedish Krona (SEK)


The Swedish krona, symbolised as "kr" or "SEK," serves as the national currency of Sweden. With a rich history established in 1873, replacing the Swedish riksdaler as Sweden joined the Scandinavian Monetary Union, the SEK is renowned for its resilience and stability. 


Sweden's export-oriented economy, characterised by industries such as automotive, engineering, and telecommunications, heavily influences the SEK's performance. Furthermore, the SEK's correlation with global economic trends and monetary policies makes it an attractive option for traders seeking exposure to the broader European market. 

 

Historical Background of the Swedish krona 

The origins of the Swedish krona can be traced back to the 17th century when Sweden transitioned from the silver standard to a bimetallic monetary system. Over the centuries, the krona evolved, experiencing fluctuations in value, and undergoing reforms to adapt to changing economic conditions. 


In 1873, Sweden joined the gold-standard-based Scandinavian Monetary Union, pegging the krona to gold. Subsequently, Sweden embraced a floating exchange rate regime, allowing the krona's value to be determined by market forces. 

 

Correlations of the SEK 


The Swedish krona (SEK) exhibits correlations with various currencies, with some of the notable ones including: 


  • Euro (EUR): Given the proximity and extensive trade relations between Sweden and the Eurozone countries, particularly Germany, the Swedish krona often shows a significant correlation with the euro. 

  • Norwegian krone (NOK): As neighbouring countries with intertwined economies, Sweden and Norway often experience correlated movements in their respective currencies, the Swedish krona, and the Norwegian krone. 

  • Danish krone (DKK): Similarly, Sweden's proximity to Denmark and their shared economic ties can result in correlations between the Swedish krona and the Danish krone. 

  • US Dollar (USD): The US dollar is a major global reserve currency and a key player in international financial markets, so movements in the USD can influence the Swedish krona's exchange rate. 

  • British Pound (GBP): While not as strong as some of the other correlations mentioned, the Swedish krona may also exhibit some level of correlation with the British pound, particularly due to trade relations and economic ties between Sweden and the United Kingdom. 

 



Czech Koruna (CZK)


The Czech koruna, represented by the symbol "Kč" or "CZK," is the official currency of the Czech Republic. Emerging as a key player in Central Europe's economic landscape, the CZK embodies the region's transition towards a dynamic market economy. 


With a focus on manufacturing, automotive, and technology sectors, the Czech Republic's export-driven economy shapes the CZK's performance. Traders eyeing opportunities in Eastern Europe will find the CZK a compelling addition to their forex portfolios. 

 

Historical Background of the Czech Koruna 


Since February 8, 1993, the Czech koruna has served as the official currency of the Czech Republic, replacing the Czechoslovak koruna following the dissolution of Soviet Czechoslovakia into independent Czech and Slovak republics. Both the Czech koruna and the Slovak koruna (SKK) were introduced at par value in lieu of the Czechoslovak koruna. 


Despite joining the EU in 2004, the Czech Republic has not yet adopted the euro (EUR) as its official currency. Nevertheless, the nation remains in preparations to transition to the common currency, albeit without an official target date for implementation. Originally, the Czech Republic aimed to adopt the euro in 2012, but opposition led to the postponement of this move following a 2007 vote. 

 

Correlations of the CZK

 

The Czech koruna (CZK) exhibits correlations with various currencies, with some of the notable ones including: 

 

  • Euro (EUR): Given the geographical proximity and economic ties between the Czech Republic and the Eurozone countries, particularly Germany, the Czech koruna often shows a significant correlation with the euro. 

  • US Dollar (USD): As one of the world's primary reserve currencies and a key player in global financial markets, movements in the US dollar often influence the Czech koruna's exchange rate. 

  • Polish złoty (PLN): Due to Poland's proximity to the Czech Republic and the significant trade relations between the two countries, there tends to be a correlation between the Czech koruna and the Polish złoty. 


Hungarian Forint (HUF)

  • The Hungarian forint, being another currency from a neighbouring country in Central Europe, may also exhibit correlation with the Czech koruna due to shared economic factors and trade relations. 

  • Slovak koruna (SKK): Historically, before Slovakia adopted the euro, the Slovak koruna maintained a correlation with the Czech koruna due to their shared history and close economic ties as part of the former Czechoslovakia. 

 

These correlations may vary over time and can be influenced by factors such as economic conditions, trade relations, geopolitical events, and monetary policies of respective countries. Traders and analysts often monitor these correlations to gain insights into potential trends and movements in the Czech koruna's exchange rate. 

 

The Czech Republic's Approach to the Euro 


Concerns stemming from the European debt crisis stand as a primary factor driving resistance to the Czech Republic's full integration into the Eurozone and the adoption of the euro as its official currency. While eventual euro adoption is anticipated for the Czech Republic, recent discourse has also entertained the notion of the nation's potential departure from the European Union altogether. 


Termed 'Czech-Out' or 'Czexit' by the media and some political analysts, this concept parallels Brexit, depicting a scenario where the Czech Republic exits the European Union entirely. Although Czech President Miloš Zeman does not endorse the idea of EU departure, he has expressed openness to holding a referendum, allowing citizens to vote on the matter, similar to the process undertaken by the U.K. in June 2016. 


Despite these discussions, the Czech Republic boasts a relatively robust economy within the EU. It exhibits one of the highest Gross Domestic Product (GDP) growth rates and among the lowest unemployment rates, standing at approximately 2.9% in 2019, with inflation hovering around 2.8%. While unemployment experienced a modest increase in 2020, it settled at 3.8% as of November 2020. 

 

Hungarian Forint (HUF):

 


The Hungarian forint, denoted by the symbol "Ft" or "HUF," stands as the official currency of Hungary. Rooted in a rich tapestry of history and culture, the HUF reflects Hungary's economic resilience and dynamism. As a prominent player in Central and Eastern Europe, Hungary's diverse economy encompasses industries such as automotive, manufacturing, and agriculture. The HUF's correlation with regional economic developments and monetary policies offers traders a gateway to the vibrant markets of Eastern Europe. 

 

Historical Background of the Hungarian Forint  

The Hungarian forint saw its initial usage between 1868 and 1892, but it wasn't until 1946 that the modern forint was officially introduced, with the aim of stabilising the national economy in the aftermath of World War II. The currency derives its name from the gold coins of Florence known as fiorino d'oro, minted from 1252 onwards and widely circulated throughout the Austro-Hungarian Empire. 

 

While the forint's exchange rate has displayed some level of stability, uncertainties within the nation's economy have adversely impacted its value in the foreign exchange market. For instance: 

 

  • The acceptance of the Treaty of Trianon in 1920 following World War I had profound repercussions on the Hungarian economy, marked by the loss of over 70% of its pre-war territory and more than 60% of its pre-war population. Five of Hungary's ten largest cities prior to World War I were absorbed by neighbouring countries. This, coupled with war reparations and the erosion of its tax base, led to a significant devaluation of the HUF, with annualised inflation peaking at nearly 1,200% in 1923. 

  • In the late 1980s and early 1990s, Hungary, along with several other central and Eastern European nations, transitioned away from communist rule, prompted by economic stagnation and inflation. The transition, though challenging, was peaceful. Hyperinflation soared to 35% during the 1990s as Hungary embraced a market economy. Although the economy showed signs of improvement in the 2000s, rampant inflation undermined the currency's convertibility. 

  • Hungary's export-oriented economy heavily relies on a skilled labour force. Key trading partners include Germany, Slovakia, Italy, Romania, and Austria. Notable industries encompass car manufacturing, production of car parts, and manufacturing components for radios and televisions. 

 

According to World Bank data, Hungary reported a -4.7% contraction in gross domestic product (GDP) in 2020 and a 5.1% inflation rate in 2021. This downturn primarily stemmed from the economic repercussions of the global COVID-19 pandemic. 

 

Correlations of the HUF 


The Hungarian forint (HUF) exhibits correlations with various currencies, including: 

 

  • Euro (EUR): Given Hungary's geographical proximity to the Eurozone and its extensive trade relations with Eurozone countries, particularly Germany, the Hungarian forint often shows a significant correlation with the euro. 

  • Polish złoty (PLN): Poland and Hungary have significant trade relations, but Poland does not share a direct border with Hungary. Therefore, the Hungarian forint may exhibit correlation with the Polish złoty. 

  • Czech koruna (CZK): Similar to Poland, the Czech Republic shares a border with Hungary, and there are considerable trade ties between the two countries, potentially leading to correlations between the Hungarian forint and the Czech koruna. 

  • Romanian leu (RON): Romania is another neighbouring country to Hungary, and while the economic ties may not be as extensive as with Poland or the Czech Republic, there can still be correlations between the Hungarian forint and the Romanian leu. 

  • US Dollar (USD): The US dollar is a major global reserve currency, and movements in the USD can influence the Hungarian forint's exchange rate, especially during times of global economic uncertainty. 

 



Swiss Franc (CHF)


The Swiss franc, symbolised as "CHF," holds a revered status as a safe-haven currency and a bastion of stability in the global financial landscape. Renowned for Switzerland's tradition of neutrality, fiscal prudence, and financial sophistication, the CHF embodies the quintessential attributes of a haven asset. Switzerland's thriving banking sector, precision engineering, and pharmaceutical industries underpin the CHF's allure as a currency of choice for investors seeking refuge during times of uncertainty. 

 

Historical background of the Swiss franc 


Until 1798, approximately 75 entities within Switzerland were engaged in coin minting activities, resulting in the circulation of 860 distinct types of currency featuring varying denominations, weights, and monetary systems. Among these currencies were thalers originating from cities such as Bern, Basel, Zurich, and Geneva. 


In 1798, the Helvetic Republic introduced a new monetary framework, anchored by the Berne thaler, equivalent to six grams and three-quarters of pure silver. This currency, known as the franc, remained in circulation until the dissolution of the Helvetic Republic in 1803 but continued to serve as the basis for currencies utilised by several member states of the Reformed Swiss Confederation. 


In 1848, with the adoption of the new Swiss Federal Constitution, the exclusive authority to issue currency within the country was granted to the federal government. The initial federal monetary legislation, enacted on May 7, 1850, by the Federal Assembly, established the franc as the official monetary unit of Switzerland. Concurrently, both the Swiss franc and the French franc were introduced into circulation. 


The establishment of the Latin Monetary Union between 1865 and the 1920s, comprising Switzerland, France, Belgium, and Italy, further intertwined the Swiss franc's value with those of its counterparts. Under this union, the currencies of all four nations were pegged to the value of silver. Additionally, the Swiss franc was incorporated into the Bretton Woods exchange rate system following World War II, a framework that persisted until the early 1970s. Notably, until 1999, the exchange rate of the Swiss franc was tied to the price of gold. 

 

Factors Influencing the Swiss Franc (CHF) 


  • Swiss National Bank and Monetary Policy 


The Swiss National Bank (SNB) serves as Switzerland's central bank, entrusted with the responsibility of formulating monetary policy and managing exchange rates. Unlike some central banks, the Swiss National Bank does rely on a specific policy rate, previously the Libor target range, to regulate monetary conditions. Previously, it utilised FX swaps and repurchase agreements to influence both the money supply and interest rates. To bolster liquidity, the Bank engages in purchasing US dollars (or other foreign currencies) against Swiss francs. SNB officials wield the ability to impact the Swiss franc through their statements and commentary concerning the currency, liquidity, and monetary matters. Any alterations in monetary policy have consequential effects on the currency. 


  • Macroeconomic Indicators 

A plethora of economic indicators relating to Switzerland's economy and market, including inflation, employment data, GDP rates, and industrial production, exert influence on the Swiss franc. 


  • Cross-Exchange Rates 

Fluctuations in non-dollar exchange rates or cross-exchange rates can influence the USD/CHF pairing. Fluctuations in non-dollar exchange rates or cross-exchange rates such as GBP/CHF may not have a significant or predictable impact on USD/CHF, due to the weaker correlation between the British pound and the Swiss franc. 


  • Positive Correlation with the Euro 

The Swiss franc exhibits a positive correlation with the euro, owing to the close economic ties between Switzerland and the Eurozone, particularly Germany. This correlation is notably apparent in the inverse relationship between the USD/CHF and EUR/USD pairs. When the EUR/USD experiences sharp movements upwards or downwards, the USD/CHF reacts correspondingly but inversely, consistently moving in the opposite direction. 

 


Danish Krone (DKK)


Danish Krone, represented by the symbol "kr" or "DKK," serves as the official currency of Denmark, Greenland, and the Faroe Islands. As a stalwart of Scandinavian prosperity and innovation, the DKK reflects Denmark's enviable track record of economic stability and social welfare. Denmark's diversified economy, encompassing industries such as renewable energy, shipping, and agriculture, shapes the DKK's performance. Moreover, Denmark's commitment to prudent fiscal policies and sound governance enhances the DKK's appeal as a reliable currency for international traders. 

 

Historical Background of the Danish Krone 

 

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The history of coin production and usage in Denmark spans numerous centuries, with organised minting activities dating back to as early as the 10th century. The earliest official Danish coins were established on the Carolingian silver standard, a system of silver currency introduced in France during the era of Charlemagne, aiming to replace the gold coinage of the Roman Empire. This silver-based monetary system, consisting of pennies, shillings, and pounds, eventually became the foundation for the British pound sterling in Great Britain. 


Regrettably, Danish monarchs, like many rulers of their time, pursued practices of periodically debasing their currency by reducing the actual silver content in minted coins, leading to multiple remonetisations in attempts to restore public trust in the nation's monetary system. One significant event in this regard was the inception of the current Danish krone in 1875. 


The introduction of the krone coincided with a period when transactions involving coins were becoming increasingly cumbersome, prompting a transition towards greater reliance on printed banknotes alongside the implementation of the new currency. 


Denmark made several endeavours to fix its currency to the gold standard, but ultimately abandoned this endeavour in 1931, coinciding with Great Britain's decision to depart from the gold standard in the same year. During Denmark's occupation by Germany in World War II, the Danish krone was temporarily linked to the German Reichsmark, followed by a peg to the British pound in the immediate postwar era. 


Presently, the krone is pegged to the euro under the European Exchange Rate Mechanism (ERM) II, a mechanism aimed at curbing excessive volatility in the euro's exchange rate with European trading partners. Over recent decades, Denmark has contemplated joining the eurozone and adopting the euro as its official currency. However, the most recent public referendum in 2000 narrowly rejected this proposition by a margin of 53% to 47%. 


 

The Danish Krone in Forex Trading 


The Danish Kroner (DKK) holds a distinctive position within the realm of Forex trading, presenting opportunities and perspectives that are indispensable for traders seeking success in navigating the global currency market. Serving as the official currency of a nation renowned for its stable economy, high living standards, and robust financial systems, the DKK serves as a conduit for comprehending the Scandinavian financial landscape. 


  • Stability and Security: 

Denmark's economic stability finds manifestation in its currency, rendering the DKK a preferred asset for traders seeking safe-haven investments amid periods of global economic uncertainty. The nation's strong fiscal policies, minimal inflation rate, and transparent governance contribute to the stability of the Kroner, instilling a sense of confidence in Forex traders. 


  • Diversification: 

Engaging in DKK trading enables investors to diversify their currency portfolios, spreading risk and accessing markets characterised by lower volatility. The DKK's correlation with major currencies like the Euro and the US Dollar equips traders with strategic alternatives, empowering them to make informed decisions aligned with global economic trends. 


  • Insight into the Scandinavian Market: 

Understanding the DKK is essential for traders interested in the Scandinavian region, as the currency serves as a bellwether for the area's economic well-being. It furnishes valuable insights into market dynamics, investment prospects, and potential risks prevalent in the region. 


  • Trading Strategies: 

Forex traders can leverage the stability and regional significance of the DKK to formulate tailored trading strategies. Whether engaging in carry trades, utilising the currency for hedging purposes, or capitalising on its low volatility for short-term gains, the DKK offers a spectrum of opportunities suitable for both novice and seasoned traders. 


 

Correlations of the DKK 


The Danish krone (DKK) exhibits correlations with various currencies, including: 

 

  • Euro (EUR): Given Denmark's proximity to the Eurozone and its extensive trade relations with Eurozone countries, particularly Germany, the Danish krone often shows a significant correlation with the euro. 

  • Swedish krona (SEK): Denmark shares a border with Sweden, and both countries have significant trade relations. Therefore, the Danish krone may exhibit correlation with the Swedish krona. 

  • Norwegian krone (NOK): Norway is another neighbouring country to Denmark, and while the economic ties may not be as extensive as with Sweden, there can still be correlations between the Danish krone and the Norwegian krone. 

  • British Pound (GBP): While there may be some level of correlation between the Danish krone and the British pound, the correlation is generally weak. The Danish krone is more heavily influenced by the Euro due to Denmark's ERM II peg. 

  • US Dollar (USD): The US dollar is a major global reserve currency, and movements in the USD can influence the Danish krone's exchange rate, especially during times of global economic uncertainty. 

 

Conclusion



In conclusion, the introduction of these six new base currencies underscores our dedication to providing traders with unparalleled opportunities to diversify their portfolios and capitalise on emerging market trends. Whether it's harnessing the resilience of the Norwegian Krone, navigating the intricacies of the Swiss franc's safe-haven status, or tapping into the dynamic economies of Central and Eastern Europe, our expanded offering opens doors to a world of possibilities in forex trading.  


For further insights into currency pairs and the foreign exchange market, register with Fusion Markets to stay updated on all the latest macroeconomic developments. 

 

 

 


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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
Market Analysis
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Trump’s Return: What Forex Traders Need to Know About the New Administration


Read Time: 6 minutes


Donald Trump’s return to Office as the 47th President of the United States marks a significant political and economic shift, creating both opportunities and challenges in the forex market. 


Trumps second-term agenda, marked by aggressive trade policies, tax reforms, and deregulation, has the potential to impact global markets in complex ways, especially the foreign exchange market. Fear not; there will be plenty of opportunities to accompany any disruptions that the Trump Administration will bring.

One of Trump’s most critical economic agenda’s is his renewed focus on tariffs. As during his first term, Trump has emphasised targeting China, with plans to raise tariffs on Chinese imports by 10–15%, ultimately increasing tensions between the two nations.


Why does this matter?


China’s economy has direct and indirect influences on markets, primarily through global trade. In 2024, China's foreign trade reached new heights, with total goods imports and exports amounting to 43.85 trillion yuan (approximately USD $6.1 trillion), marking a 5% increase from the previous year. Exports grew by 7.1% to 25.45 trillion yuan, while imports saw a 2.3% rise to 18.39 trillion yuan.

The trade surplus expanded significantly, reaching a record $992 billion, driven by a surge in exports, particularly to the U.S. So, you can imagine how Trump’s focus on tariffs could affect this.

Other proposals include broad tariff hikes, with some extreme scenarios suggesting across-the-board levies of up to 10% or a staggering 60% on Chinese goods. Such moves, while aimed at protecting American industries, carry substantial implications for global trade flows – which will of course affect currency rates.

The U.S. dollar, often a safe-haven currency as we know it, has provided an impressive bull-run recently;

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Figure 1-DXY (US Dollar Index) Daily Chart



There are essentially two scenarios:

  1. A weaker USD

    In his first term as US President, Trump openly said the dollar (USD) was too high. And now, in his second term, he’s singing the same tune. This could provide some fantastic opportunities for us forex traders – especially when currencies such as the AUD and NZD are severely undervalued.

  2. Continued dollar strength

    We could see further strength if global investors react to heightened uncertainty and anticipated inflationary pressures.

Overall, it’s likely that continued tariff increases will disrupt supply chains and weigh on U.S. economic growth, potentially weakening the dollar in the long term.

In addition to trade, Trump’s fiscal policies have the potential to impact currency prices. The extension of the 2017 tax cuts, along with potential new tax breaks, is expected to stimulate economic growth in the short term but could also widen fiscal deficits, already exceeding 7.5% of GDP. Higher government borrowing to finance these deficits may push up U.S. Treasury yields, attracting foreign capital and boosting the dollar. Yet, sustained fiscal imbalances could lead to long-term concerns over debt sustainability, ultimately eroding confidence in the greenback.

The Trump Administration’s approach to deregulation is yet another factor likely to influence forex prices. Trump’s plan to roll back Biden-era regulations across sectors such as energy, finance, and manufacturing aims to reduce costs for businesses and encourage investment. This deregulation, in addition to tax cuts, could lift business confidence and support equity markets, creating a risk-on environment. In such scenarios, higher-yielding currencies such as our Australian dollar and the Canadian dollar could potentially benefit from improved sentiment and rising commodity prices.


How to Trade Trump 2.0


Monetary and Fiscal Policy Signals


So far, Trump has been on a war path signing off executive orders and pushing to make change. Given that currency markets are influenced by macroeconomic and geopolitical events, it’s imperative to keep an eye on the headlines for potential shifts in monetary and fiscal policies. In doing this, we can stay one step ahead.


Look for Hedging Opportunities


Trump’s presidency previously brought unexpected shifts in international relations, creating geopolitical uncertainty that could impact the forex market; during such times, safe-haven currencies such as the CHF or JPY are typically reliable options. Additionally, if Trump reinstates policies that favour U.S. energy independence, oil-exporting nations such as Canada (CAD) or Russia (RUB) may see increased currency volatility tied to changes in commodity markets.


Be Prepared and Adapt


Trump’s criticism of the Federal Reserve for maintaining high interest rates during his first term suggests potential attempts to influence monetary policy, making the Fed’s reactions critical for USD movements. Policies promoting growth or supply-side inflation could drive rate adjustments, adding to forex market volatility. As traders, we need to be prepared – we know Trump is a bit of a loose cannon, but we also need to adapt to changes in market structure and macroeconomics.


News and Risk Management


Taking all of this into account, we traders need to keep one eye on the news headlines, and one eye on the markets. Stay up-to-date with major news events and avoid trading within close proximity of them, reducing exposure on any open trades.

In the months ahead, expect volatility and surprises. Trump has never been more motivated in improving things for the United States. Given that the greenback is the most important currency to watch, we traders need to be prepared for anything that he throws at us. Traders need to embrace the volatility, identify trends, and keep an eye on the macro-economic influencers that ultimately drive the pricing of currencies.

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04/02/2025
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