Currency Momentum Returns with Trump’s Policies:
Tim Brooks, who has spent ten years buying and selling currencies,
always felt that the real action was happening elsewhere.
At Optiver Holding, a leading London-based firm, his team relied
on market volatility to quickly profit from sudden currency price fluctuations.
However, the market has experienced a decline in volatility since the 2008 financial crisis,
as major central banks began to coordinate their monetary policies.
Contents:
The Return of Volatility
The Revival of the Forex Market
Growing Interest from Hedge Funds
Banks Resume Hiring in Forex Trading
Will This Recovery Last?
The Return of Volatility with Trump’s Policies
Despite occasional market disruptions, such as last year’s sharp yen appreciation following an unexpected rate hike,
Currency trading momentum Returns had largely shifted toward stocks and bonds.
However, this landscape changed dramatically with Donald Trump’s re-election,
as his rhetoric on trade policy changes triggered significant fluctuations in the euro and the Canadian dollar,
both of which dropped amid tariff threats and rebounded when these measures were postponed.
As the US dollar strengthened, the Federal Reserve deviated from other central banks’ policies,
keeping interest rates stable while others continued cutting rates.
As a result, Optiver saw its daily forex trading volume double compared to 2024,
prompting the company to operate 24/7 to meet rising demand.
The firm even relocated some traders to Singapore to expand its operations there.
Brooks, who started as a trainee and is now Head of FX Options Trading, stated:
“Currencies have long been one of the least volatile and least attractive asset classes for investors,
but now, rising price fluctuations draw significant interest.”
The Revival of the Forex Market
The renewed enthusiasm was not limited to Optiver but extended to the financial sector.
In January, Wells Fargo appointed Enrique Bayan,
a former Deutsche Bank trader, to lead an expanded FX options trading team.
Meanwhile, Citigroup expanded its derivatives trading desks in London and Singapore, recruiting traders from Barclays.
According to data from the Chicago Mercantile Exchange Group,
January saw the highest FX options trading activity since February 2020,
with daily volumes surging 75% compared to the previous year.
Coalition Greenwich, a financial analytics firm, predicts that banks’ FX trading revenues
will grow in the next two years despite the expected slowdown in bond and commodity trading.
Frederick Ripton from Neuberger Berman Asset Management commented:
“The forex market was in hibernation,
but we’re focusing on it now because we believe it can deliver real added value.”
Growing Interest from Hedge Funds
With the foreign exchange market valued at $7.5 trillion,
hedge funds have returned aggressively to the sector.
According to Citigroup, Asian currencies have experienced record activity since the US elections.
Although the number of currency-focused hedge funds declined during the low-interest-rate era,
the remaining funds now see massive capital inflows, according to BarclayHedge, a data analytics firm.
Kevin Rodgers, former Global Head of FX Trading at Deutsche Bank until 2014, stated:
“The FX market was at its peak during the financial crisis… it was a golden era for traders.”
Banks Resume Hiring in Forex Trading
With increased reliance on algorithmic trading, banks had previously downsized their forex trading desks.
However, as hedge funds’ appetite for risk grows, banks are hiring professional FX traders again.
Lauren Van Belgon, Portfolio Manager at Wellspring Global Investments, stated:
“It feels like a return to the 1990s… an entire generation of traders has never witnessed such volatility.”
Among the newcomers is Sasha Gill, who recently joined Barclays London’s FX sales team straight out of university.
She spent her first few weeks learning trading jargon such as “Yard of Cable,
” which refers to selling a billion pounds for dollars.
She also began following Trump’s Truth Social platform, recognizing its market influence.
Gill stated:
“It’s incredibly exciting… we were given responsibilities from day one to help manage the growing trade flow.”
Will This Recovery Last?
With Trump’s ongoing trade policy volatility, it remains uncertain whether this surge in forex trading will be sustainable.
However, banks’ return to hiring in this sector suggests that volatility may be more persistent than many expect.
Adam Gazzoli, Co-founder of Adamis Principle Recruitment in London, noted:
“Banks are actively looking for experienced traders, but many firms lack professionals with two decades of market expertise.”
Currency Momentum Returns with Trump’s Policies
