October 2015 Forex Industry Metrics: Still Shaky!

After suffering a bit of a slump in September, forex trading activity saw another weak month in October. Financial exchanges from different parts of the globe, along with some forex brokers, reported more declines in average trading volumes lately. What’s up with that?!

CME Group, an international derivatives marketplace spanning products like interest rate securities, FX, equity indices, and commodities, saw a whopping 22.4% tumble in average daily forex volumes (ADV) from 947,000 in September to just 735,000 in October. This amounts to a 25% year-over-year decline from the 986,000 ADV in October 2014. In addition, the average daily notional value of FX contracts dropped like a rock from $95 billion in September to $75 billion.

This downturn was not limited to the forex market, though, as volumes were down across the financial board. CME reported a 27% yearly decline in total contract volumes, dragged mostly by falling equity index turnover and declines in Eurodollar volumes.

In Russia, the Moscow Exchange noted that forex market turnover slipped by 11% on a monthly basis but enjoyed a year-over-year rise of 41.3% in October. Other financial products such as derivatives and precious metals trading also enjoyed yearly gains.

In the Tokyo Financial Exchange, the total trading volume of forex contracts based on Click 365 data fell by 14.4% in October at an ADV of 138,444. On an annualized basis, this represents a 24.8% drop in volumes. Most currency pairs tracked by the institution recorded declines in activity, with the exception of EUR/USD, CHF/JPY, and USD/JPY. Heck, EUR/USD even saw a jaw-dropping 149.6% increase in turnover from a year ago!

Data from Tokyo Financial Exchange

Data from Tokyo Financial Exchange

Reviewing the main themes that affected the forex market last month suggests that the ECB’s dovish bias spurred by deflation in the euro region was probably responsible for the huge increase in EUR/USD interest then. CHF/JPY may have also been affected by ECB easing speculations, as the Swiss National Bank (SNB) tends to intervene in the currency market to counter any potential declines in EUR/CHF levels.

Meanwhile, USD/JPY trading activity was likely spurred by talks of a Fed liftoff before and after their actual FOMC policy statement, especially since some market participants believe that it’s time for the Bank of Japan (BOJ) to ramp up its stimulus program. Moving forward, these factors could continue to affect trading volumes in the last couple of months of the year, especially if the central banks do decide to take action. Stay tuned!