Mario Sanchez

Volatility to dominate conversations at iFX Expo Dubai

January 2023 in Partner Content

Mario Sanchez, Managing Director and Global Head of Sales at FXCM Pro, shares his views on what he expects from iFX Expo, which takes place between 17-18 January in Dubai, and recent market trends.

The firm invites everyone to speak to its team at booth #80 about how its strategic partnerships and market-leading solutions provide clients with competitive pricing, innovative products and best-in-class market access.

The iFX Expo, which brings together around 3,500 people in Dubai, has come at an exciting time for the FX industry.

Volatility has dominated the FX market in recent months, with the US dollar (USD) surging to 20-year highs while the British pound (GBP), Japanese yen (JPY), and the euro (EUR) dropped to record lows.

The FX markets show little sign of stabilisation and this uncertainty creates more opportunities for institutions seeking alpha and more pitfalls for those seeking to manage their FX risk.

Aggressive monetary policy

In December, the US Federal Reserve slowed down the pace of its tightening cycle, but maintained its aggressive stance, while officials raised their projections for the appropriate policy path. They now expect rates to peak at median of 5.1%, which implies another 75 basis points worth of hikes. [1]

Similarly, the European Central Bank downshifted to a 50 basis points increase, but was also very aggressive and out-hawked its US counterpart. It signalled further tightening, with Ms. Lagarde saying that rates will need to rise “at a 50-basis-point pace for a period of time”, opening the door to potentially 100 bps of hikes. [1]

EUR/USD extended its advance to six-month lows last week and broke above the key 38.2% Fibonacci of the 2021 high/2022 lows rise. However, it has lost its vigor and consolidates around this region as investors assess the monetary policy path of the ECB and the Fed.

The Bank of England had started tightening a year ago but was limited to small rate adjustments. This approach has been unable to control surging inflation, and the bank accelerated the pace of tightening over the summer. This culminated to a 75 basis points hike in the previous meeting last month [2], which was the biggest since 1989.

The bank shifted gears again in December, but towards the opposite direction, since it delivered a minor increase of 0.5%, bringing the Bank Rate to 3.5% and new fourteen-year highs.

GBP/USD managed to stage an impressive recovery from September’s record lows, which extended to six-month highs after the soft US CPI report. GBP/USD has had little reaction to the downshift from the Bank of England, staying under pressure.

Supporting our clients through the uncertainty

Monetary policy has been a critical driver of this volatility. In line with our ‘Client First, Trader Driven’ mantra, we have been helping our clients navigate these uncertain market times.

In challenging times, banks reassess their eligibility criteria for prime brokerage, making it extremely difficult for small and medium-sized trading institutions to access credit. FXCM Prime identified a gap in the market for a prime-of-prime service aimed at small-to-medium-sized non-bank financial institutions. It acts as a neutral intermediary and facilitates an all-to-all trading model whereby users can act as liquidity providers and liquidity takers. Crucially, our technology provides direct market access with centralized clearing. This allows our customers to source liquidity from more than ten professional trading venues through a single account.

Our market data has helped boost our clients’ trading and risk management strategies. Historical bid/ask prices are easily accessible by our trading API’s and clients are able to develop, back-test and automate strategies in a wide-range of software environments to ensure they get the best outcome.

While other firms hike costs in response to inflation, we have made our pricing more competitive. We further reduced spreads on major currency pairs and CFDs for our institutional clients, providing added value to our client’s trading activities.

We also work with some innovative partners. Examples include our recent collaborations with oneZero, Integral, TrueFX, PrimeXM, and Gold-I. These demonstrate our commitment to providing our customers with advanced technology and enhanced opportunities.

If you’re attending the iFX Expo Dubai from 17-18 January, get in touch today to set up a meeting with the FXCM Pro team.