by Matthew Davis on January 30, 2019

December brought a good month for brokers, FX volatility to rise in 2019

If you ask any broker, what is their least favorite month for their business, most of them if not all of them, will tell you it is the last month of the year. Things are going in a slow pace and December usually brings the lethargic activity, markets are usually less volatile, as trader attention is not set on the business, it is mostly concentrated on the holidays in the last days of the year. The expectations for this December were mostly the same, considering the struggling period for even the best Forex brokers across whole Europe. They were desperately searching for ways to optimize their business Since August.

However, this December is proving to be different from all the other. The volatility has been pretty much the same compared to the recent months and did not go down. At the same time, the global stock market rout coupled with volatility in commodities, which is driving significant volume for brokers.

The core of the rise in volatility

This December, The Dow Jones Industrial Average registered its worst, since the days of the Great Depression back in the 1930s. There is huge uncertainty in the ongoing free trade, on the other hand, the impasse between US president Donald Trump and Capitol Hill is growing daily. Political uncertainty is growing too and is much more central. While the president is blaming the stock market decline on the Fed, the investor’s distrust is also worsening. Over the last period of time Trump has so many unilateral decisions that the investors do not know what to expect and they do lose the trust into the long-term policy agenda of the White House. This political uncertainty brings high volatility on the table.

What does it mean for brokers?

Brokers have struggled a lot in the last several months. Since the new regulatory framework was imposed on the industry, brokers were trying to accommodate the new leverage restrictions in the aftermath. Since that, the migration of the clients to offshore companies increased, at the same time the volatility got higher this month and given circumstances gave some of the companies a new breath.

Some of the industry insiders have confirmed that the trading volumes indeed ticked higher in the final days of this year. The market moves continued after the Christmas break and traders returned to a thin market.  Although experts are predicting the economy will continue to slow down and there will be a lot of back and forth, but the situation is still promising a good room for volatility in the upcoming year. In 2018, due to low volatility and trading activities, many of the companies still managed to have a solid first half-year financially. Theoretically, this could mean that with high volatility the results will be boosted in an active market.

Some of the investors have named the marker dip as the best opportunity to go long stocks for some time, stating that go long volatility is a good strategy for the traders now. It does not matter if these will be proven correct or not, still, the environment looks to be good for the brokers at the end of the year and in 2019 as it promises high volatility, which is always welcomed by the brokers.

By Matthew Davis

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