Why Forex Volumes Shrank in November

After the recent surge in trading activity for September and October, most forex brokers reported a tumble in trading volumes for November. CME Group recorded a 5.9% downturn in average daily volumes from 986,000 contracts in October to 929,000 contracts in November. Compared to a year ago, November 2014 trading volumes under CME were still up 29%.

forex volumes novemberIn the U.K., ICAP reported a 5% drop in average daily forex volumes for its electronic brokerage division EBS. Total trading volume for the ICAP group marked a 13% decline from October’s $798.1 billion to $694.1 billion in November. On a year-over-year basis, the November 2014 average daily volume of $123 million is up 55%.

Meanwhile, Interactive Brokers saw a 15% decline in Daily Average Revenue Trades from 680,000 to 576,000 for November. Customer accounts stood at 279,000, which is 1% higher compared to the previous month.

Industry analysts explained that the recent decline in forex trading volume was most likely caused by a fresh wave of uncertainty in the market. Traders probably hesitated to take larger positions or commit to longer-term forex setups as sentiment appeared to keep shifting on a dime last month.

Recall that a bunch of economic factors forced some forex trends to take a break in November, as the BOE shifted to a less hawkish stance while Japanese Prime Minister Abe announced a snap election and a delay in the next sales tax hike. Apart from that, the referendum on the Swiss gold initiative and the much-awaited OPEC announcement had cautious traders sitting on their hands.

It has been observed that shifting central bank biases tend to spark ranging market environments which barely offer any swing trade opportunities. During these times, adjustments to trading strategies can be considered, as smaller profit targets and shorter-term setups might work better.

Moving forward, forex brokers don’t seem to be expecting any surge in volumes for the rest of the year, as traders might book profits early during the December holidays. Some expect the so-called Santa Claus Rally to spark an end-of-the-month jump in volumes, although this might not be so evident in the forex market.