About Us
Trading
Platform & Tools
Partner with us
Help
Create an account LOG IN

Loading...
No results

Top Forex Events In The New Millennium

Fusion Markets

post content image

Foreign exchange (FOREX) goes through ups and downs. Some events had stripped bare the possible volatility of the market, causing fear in the hearts of investors. Here are some top events since the year 2000 that caused chaos in the markets.


2013 Forex Probe


The Forex Probe of 2013 was a scandal that revealed how international banks had been working together for at least a decade to tweak Forex market exchange rates.  

 

Again, this event was all about investor fears of market manipulation as a result of bank collusion.  It wasn’t easy to trust the market again after such practices were revealed. 

 

Four major banks admitted involvement, but the 2013 Forex Probe remains one of the most impactful foreign exchange events since 2000, even though the banks paid up $6 billion in fines.  

 

Greek Debt Crisis


In 2013, the Greek economy revealed its fragility, although it already showed some cracks during the 2007 worldwide financial crisis.  


It looked like Greece was going into an irreparable downfall. Still, the European Union overextended itself by granting it a generous loan of £68 billion. While the EU might have saved Greece, this move would remain one of the top events in Forex history for such a large amount of money changing hands.  

 

The consequences of the crisis could still be felt as Greece’s debt problems reverberated in 2015. Because Greece couldn’t reach its deal, some currencies surged, such as the Japanese Yen and Swiss Franc found which found themselves on the rise.  

 

However, other currencies didn’t fare so well in 2015. The Euro plunged in the Asian trading session. The dollar also experienced a one-month low of 122.10 yen.  

 

Political uncertainty in one country can affect many other countries, and sometimes the impact lasts for years. That is why the Greek Debt Crisis of 2013 makes it to our list of the most significant Forex events in the new millennium.  

 

2016 Sterling Flash Crash

 

Since we have already looked at what a flash crash is about, we can go straight to how the Sterling Pound lost its value within seconds on the 7th of October 2016.  

 

A fat finger error was suspected, but the Bank for International Settlements ruled that there was no proof it was the case. Further investigations revealed that algorithmic trading programs had triggered the crash. The algorithm issue was paired with traders who didn’t want to take much risk.  

 

GBP/USD - Sep-Nov 2016 - Forex chart

 

British Pound/U.S. Dollar – Sep-Nov 2016

 

 

2016 BREXIT

 

Brexit 2016 caused panic in the European Union, especially when its economic effects were felt. Of course, it also had an impact on the foreign exchange market. 

 

The story of Britain’s breakup with the European Union was one of the top events in politics and Forex history. It went to show just how intricately related these aspects were.  

 

The UK’s unexpected move was what created the panic. Understandably, something so unprecedented had to affect the market. Right before the votes were out, the British pound sterling was moving in an upswing trend. However, it ended in a closing of 8% down for the GBP/USD pair on that day. 

 

A slide preceded the Brexit-caused slump for about a year.  

 

USD/JPY and AUD/USD Flash Crash of 2019


You may believe that Apple is mainly influential in the technology market. Think again. Its reaches have some effects on the foreign exchange market, as well.  

 

Apple’s statement in January 2019 that emphasised the Chinese economy’s struggle had several investors selling their most volatile currencies. 

  

When investors lose confidence in the Chinese economy, their trust in the AUD and JPY also fluctuates. After all, Australia is its most important trading partner.  

 

Therefore, a simple statement from Apple in 2019 has caused one of the most significant foreign exchange crashes of recent years.  

 

undefined


U.S. Dollar/Japanese Yen – Jan 2019

 

Swiss Francs Crash 

 

In the same year, in February, the Swiss franc also suffered a crash. However, some considered this an inconsequential event.  

 

The Swiss Franc experienced a significant drop during the Asian trading session on the 10th of February. It dropped against the US dollar and other major peers.  

 

When the Japanese markets closed for National Foundation Day, the Swiss francs suffered from a lack of liquidity.  

 

Another critical Swiss franc crash happened a few years prior to this, in January 2015. The flash rally, as some call it, occurred after the Swiss National Bank announced that its currency would no longer be pegged at 1.20 against the Euro. Because of this, the franc went up by 20% against not only the Euro but also some major currencies.  

 

2020 Black Swan Event

 

The Black Swan event certainly caused a stir in the financial markets. Moreover, it points to the fall of the most popular of cryptocurrencies - Bitcoin. 

 

So, when the cryptocurrency fell to almost 4970 USD per coin, it caused sheer panic among investors. That was an 80% loss in value. For comparison, its 2017 value was at 19716 USD. 

 

Bitcoin was not alone in creating fear among investors, as Ethereum also dipped from 285 USD to 110 USD. COVID-19 was believed to be the cause of the plunge.  

 

Because the cryptocurrency crisis of 2022 was considered a Black Swan event, it affected other financial markets, including foreign exchange.  

 

The fear generated by black swans is especially fearsome due to their ability to wipe out entire accounts. Reliance on standard forecasting tools can fail to predict potential damages, and that is what makes black swan events so rare and devastating. 

 

Coronavirus Pandemic

 

The COVID-19 pandemic continues to make its effects known in various industries worldwide. During that crisis economic growth expectations were downgraded in fear that major economic sectors had to be shut down due to the increasing coronavirus cases. That uncertainty reduced the demand for local currencies and investment funds. In addition, it impacted exchange rates and the fluctuating value of the US dollar as a world reserve currency.  

 

As a result, economic and political measures created significant changes worldwide and left a mark in Forex history. 

 

Conclusion

 

While there may be more FOREX-related events in the past and the upcoming future that will affect the market, the above are the ones that still have tangible impacts in the past few years. It is crucial for forex traders to stay ahead of an ever-changing market, and one of the ways to achieve it is to understand its history. 

 

To access the world’s markets easier and at a lower cost get a live account with Fusion Markets. 



Financial Markets Global Economy Economic Events Financial Trends Market Analysis Currency Trading Forex Events

We’ll never share your email with third-parties. Opt-out anytime.

Relevant articles

Trading and Brokerage
post image main
Index CFD Dividends | Week 09/12/24

Read time: 3 minutes.


Indicative Dividend Adjustments for Indices: Week Starting December 9th, 2024.


FM Dividends 9/12/24

* Please note these figures are quoted in the index point amount and are subject to change

 

What is a dividend?


Dividends are a portion of company earnings given to shareholders. As indices are often composed of individual shares, an index dividend pays out based on individual shares proportional to the index’s weighting.


Trading on a CFD Index does not create any ownership of the underlying stocks, or an entitlement to receive the actual dividends from these companies.

 

What is an ex-dividend date?


An ex-dividend date is the cut-off date a share must be owned in order to receive a dividend. If an investor buys a share after the ex-dividend date, then they will not be entitled to earn or pay the next round of dividends. This is usually one business day before the dividend.

 

Do dividends affect my position?


Share prices should theoretically fall by the amount of the dividend. If the company has paid the dividend with cash, then there is less cash on the balance sheet, so in theory, the company should be valued lower (by the amount of the dividend).


Due to the corresponding price movement of the stock index when the ex-dividend date is reached, Fusion must provide a 'dividend' adjustment to ensure that no trader is positively or negatively impacted by the ex-dividend event.

 

How will the dividend appear on my account?


The dividend will appear as a cash adjustment on your account. If your base currency is different from the currency the dividend is paid out in, then it will be converted at the live FX rate to your base currency.

 

Why was I charged a dividend?


Depending on your position, given you are holding your position before the ex-dividend date, you will either be paid or charged the amount based on the dividend. Traders shorting an index will pay the dividend, whereas traders who are long the index will be paid the dividend.

 

Why didn’t I receive my dividend?


You may not have received a dividend for a number of reasons:


- You entered your position after the ex-dividend date

- You are trading an index without dividend payments

- You are short an index


If you believe the reasons above do not apply to your position, please reach out to our support team at [email protected] and we’ll investigate further for you.




02/12/2024
Trading and Brokerage
post image main
The Hidden Forces Driving Price Movements

Read Time: 5 minutes


There are true complexities that drive price movements in the forex market. Beneath the surface of visible price changes lies the market’s microstructure; an intricate web of factors influencing how prices fluctuate.  


Market microstructure focuses on the mechanics of trading, the behaviour of participants, and their involvement in the fluctuations of price. Understanding these hidden forces gives traders a clearer picture of market behaviour, equipping them to make more informed decisions in a competitive and chaotic environment.




Components of Forex Market Microstructure




Order Flow Trading


Order flow is the net volume of buy and sell orders in the market and plays a major role in shaping price movements. Increased buying pressure can push prices up, whilst selling pressure often leads to declines. By analysing order flow, traders can gauge momentum and anticipate short-term price shifts.



Bid-Ask Spreads


The difference between the bid (buy) and ask (sell) prices reflects market liquidity and can vary depending on trading volume and volatility. Wider spreads generally indicate lower liquidity or heightened risk, while narrower spreads signal a more stable and liquid market. Monitoring bid-ask spreads helps traders assess market conditions and transaction costs.



Market Depth and Forex Liquidity


Market depth refers to the volume of buy and sell orders at various price levels, offering insights into forex liquidity. High market depth indicates robust liquidity, making it easier to execute large trades without impacting prices. Shallow depth, however, can lead to higher volatility, as fewer orders can cause rapid price changes.



Market Participants


The forex market comprises of various participants, including;

  • Governments
  • Banks – Central & Commercial
  • Hedge funds & Investment portfolios
  • Corporations
  • Institutional Traders
  • Retail traders



undefined



Large players such as banks and hedge funds have a significant influence on price movements due to their transaction volume. In contrast, retail traders have less influence individually but can impact markets in aggregate, particularly in lower liquidity situations.



Price Discovery Process


Price discovery is the process by which the forex market determines the price of a currency pair. This process is heavily influenced by information asymmetry, where certain participants have more information than others, often leading to advantages in trading. For instance, institutional traders may have access to economic forecasts before retail traders, potentially moving prices before the data reaches the wider market.


High-frequency trading (HFT) has also become a significant part of price discovery. HFT involves executing trades at extremely high speeds, often driven by algorithms designed to capitalise on minute price discrepancies. While HFT can add liquidity, it can also cause rapid price changes that impact the price discovery process.



Liquidity Providers and Market Makers


Liquidity providers, such as banks and large financial institutions, ensure the forex market operates smoothly by offering to buy or sell at quoted prices, maintaining liquidity.


Market makers are liquidity providers who actively facilitate trades by setting bid and ask prices. By adjusting these prices, market makers can influence short-term price movements, especially in low-liquidity situations.


Market makers operate through both electronic trading and voice trading channels.


  • Electronic trading, facilitated by platforms and algorithms, is known for its speed and efficiency.

  • Voice trading, on the other hand, is often reserved for complex or large orders requiring negotiation, allowing for nuanced price adjustments in response to changing market conditions.



Order Types and Their Impact


The type of order a trader places can affect market dynamics significantly:


  • Limit Orders: These are orders to buy or sell at a specified price or better. They contribute to market depth and can create temporary support and resistance levels, as these orders accumulate in the order book.

  • Market Orders: Executed immediately at the current price, market orders can trigger rapid price shifts, especially if large orders are placed in low-liquidity periods. Market orders are often used to enter or exit positions quickly but may lead to slippage.

  • Stop Orders: These orders, triggered when prices reach a specified level, can amplify market moves as clusters of stop orders trigger simultaneously. This is common in trending markets, where stop-loss orders cascade as prices rise or fall.

  • Hidden and Iceberg Orders: Hidden orders are not visible in the order book and are typically large institutional orders that aim to reduce market impact. Iceberg orders reveal only a portion of the total order, with the remainder hidden until the visible part is filled.


A diagram of a graph Description automatically generated with medium confidence



Microstructure Anomalies and Opportunities


Understanding market microstructure can help traders identify unique trading opportunities:


  • Flash Crashes and Liquidity Holes: Flash crashes occur when liquidity temporarily dries up, causing sharp, rapid price declines. Such anomalies are often triggered by HFT algorithms or large, sudden orders in thin markets, such as the Asia session. Identifying potential liquidity holes can help traders avoid losses in volatile moments.

  • Arbitrage Opportunities: Discrepancies in currency prices across different platforms or regions can lead to arbitrage opportunities. While these are usually short-lived, microstructure knowledge can help traders identify and act on price inefficiencies quickly.

  • Leveraging Microstructure Knowledge: Advanced traders can use microstructure insights to make informed decisions, such as placing orders at levels where hidden liquidity or large stop orders might exist. This allows them to anticipate moves driven by institutional activity or market maker adjustments.



Conclusion


Forex market microstructure highlights the true forces that drive price movements, from order flow trading and market depth to the impact of different participants. For traders, understanding these components is crucial to being successful in the forex market. By analysing and having a thorough understanding of microstructure, you can gain a competitive edge, interpreting price action in real-time and making more strategic decisions.


As the forex market continues to evolve, staying updated on microstructure concepts and integrating them into trading strategies can lead to a deeper understanding of market behaviour. This knowledge can enable you to adapt and succeed over the long-term.


Trade with us today!

12/11/2024
Ready to Start Trading?
Get started live or get a free demo
GET A LIVE ACCOUNT OR TRY A FREE DEMO