The Impact on Foreign Exchange This Year


January 4, 2020 | AtoZ Markets – The world has never been as unstable as we witnessed in 2020. The Global Pandemic and its outbreak certainly sent markets in ripples and every venture became trickier. Forex and trading depend a lot on national and international factors. As conversion rates kept fluctuating every day and fanatically, so the overall gainers were people with smart investments in foreign shareholdings. Here is a comparison of the major 3 currencies i.e. Great Britain Pound, United States Dollar and Euro- and how they are performing against each other at the end of 2020.

GBP AND USD

Brexit came with a lot of uncertainties – it impacted the markets like never. The Great Britain Pound, sometimes considered the most stable powerful currency before 2016, continued to fall amid failed European Union-Brexit negotiations. The Forex (Foreign Exchange) rate dived further when compared to the United States’ Dollar, which impacted the markets. This resulted in increased concerns among the market shareholders who trade between the currencies. Investors pulled out heavily, sighting tumultuous British economic changes.

Political instability in the Country didn’t help either. Three Prime Ministers in quick succession and the economy was in the doldrums. The Pound Sterling fell below $1.30 for the first time in 3 decades in 2016. But the COVID-19 Pandemic made the slump even bigger. In March 2020, GBP fell to $1.15, which is its worst performance in more than 35 years.

USD AND EURO

Euros are on a good roll and recently touched the 32 months high of 1.22 against the Dollar. After suffering for 3 years because of Brexit standstill with other Countries teasing that they may follow suit. On top of which the fact that Europe bled the most while fighting a lone battle after the early breakthrough of the virus. Europe’s robustness proved to attract the investors to buy Euro when going for Forex.

US failed to deliver when the virus was staring at it. They lost a golden opportunity to come out as the shining stable light to prove that Dollar is still the leader of Forex transactions. At one point early in the year, Dollar stood as tall as 1.06EUR. It had a great chance to show intent that both currencies could be on par if not Dollar passing Euros had been a statement not observed in decades – by a major currency. But now it seems that Euros will gain its lost territory once normalcy returns to the markets.

FUTURE PROSPECTS

The markets are touted to gain momentum in 2021. As there has been considerably lesser high risk investments and Forex trades in 2020. The news of vaccines finally being tested on people is also good news for investors. Overall, the upsurge/downfall of GBP will be interesting to see around the BREXIT negotiations again next year. The experts believe it will eventually recover and pick up pace. Currency futures have the added baggage of trading commissions, exchange fees, and clearing fees. These fees can add up quickly and seriously eat into a trader’s profits. Hence, assured gains are going to bring the players back on the field.

Euros are expected to remain stable throughout the year but expect it to nosedive if the negotiations go south for what’s remaining of the European Union. These are trickier times.

The dollar seems to be on an upsurge. The markets did well for five years, and the streak doesn’t seem to stop as in 2019 US saw almost a stable 3% growth. Once the pandemic is taken care of, there are good signs of growth and revival. The fresh leadership also seems to put investors on their toes, and it may or may not be cashed upon once the money is injected back into the markets. Now for the people speculating – 2021 is going to keep everyone interested.

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