Before we close this chapter on 2015 and open a new one, let’s look back at the most memorable market themes that likely affected your forex trades one way or another. Did you make profits or losses from any of these?
1. SNB shocker
Starting off the year with a bang was the SNB surprise announcement to scrap the franc peg in mid-January, wreaking havoc among franc pairs and some unfortunate forex trading accounts.
At that time, most of the headlines were filled with updates on brokers’ insolvency and beefed up margin requirements, but what wasn’t typically discussed was how it left market watchers extra paranoid about future SNB intervention throughout the year, particularly when ECB easing expectations were the talk of the town. This made franc pairs a little more sensitive to euro zone data, with any bearish signals for the euro also spurring losses for the Swiss currency.
2. Greek debt drama
Speaking of the euro zone, the Greek debt drama also made its way to the top market themes for the year when my doppelgänger Alex Tsipras and his anti-austerity government were faced with the bailout conundrum. Tense negotiations, one nasty walkout, a couple of referendums, an IMF default, and a few additional austerity measures later, creditors finally granted the debt-ridden nation its third bailout package.
3. Oil price slide
There’s no denying that the crude oil slide that started last year dumped a lot of trouble in the global economy for the most part of 2015. From deflationary concerns to job losses in commodity-dependent nations, the oil industry slump also spurred a lot of risk-off moves in the forex market.
Even so, the hotshots over at the OPEC oil cartel have stubbornly refused to reduce their output levels, possibly trying to edge out the growing competition from U.S. rig operations with further downside pressure on prices and profitability. This standoff has spilled over to lower transportation costs, downward pressure on consumer price levels, and a shift to a less hawkish stance for some central banks.
4. China, China, China
Another country that dominated the financial headlines every now and then is China, which has been off to a shaky start with its massive stock market slump then finished strong with the yuan’s world reserve currency approval from the IMF.
Forex market participants dwelled mostly on the downturn in China in the past few months, though, as this also had a nasty spillover effect on emerging nations and the rest of the global economy. In particular, slowing Chinese growth prospects weighed on raw material commodity shipments from Australia and dairy product exports from New Zealand, including the corresponding forex price action of AUD and NZD.
Central bankers also kept highlighting the potential risks stemming from China during their rate decisions around the middle of the year, adding an extra degree of caution in their economic outlook and policy biases.
5. ECB easing expectations and letdown
Just when it seemed that an economic recovery in the euro zone was taking hold, the region printed negative CPI readings and prompted the ECB to consider adding to its easing efforts. Dovish Draghi began dropping hints on which kinds of stimulus measures they might implement, reiterating that policymakers will do whatever it takes to boost inflation and sending the shared currency on another wave lower.
But when their official policy decision came along, the actual announcement spurred a massive rally for the euro, as forex traders seemed disappointed that the ECB didn’t go all out with their QE expansion. All this “buy the rumor, sell the news” action led to hundreds of pips in reversals towards the last stretch of the year.
6. Fed liftoff
Last but most certainly not least are Fed liftoff speculations, as the U.S. central bank kept playing a game of “Will they or won’t they?” with forex market watchers. Tightening expectations were actually in play around the middle of the year when Uncle Sam had been churning out one upbeat NFP report after another, but this positive streak wasn’t sustained.
Since then, interest rate hike expectations were put on the back burner, as Fed policymakers also grappled with the external threats stemming from the slowdown in China. The weak inflationary outlook also seemed to be a deal breaker for some FOMC members, although the last couple of jobs reports for the year put the Fed back on track towards hiking rates in their December meeting and allowed the Greenback to recover against its forex peers for the last stretch of 2015.
Were you able to catch these strong forex moves this year? Don’t be shy to share your best (and worst!) trades in our comments section below, and post any major market themes that I may have missed.