The April slowdown in forex activity was followed by a shaky performance in May as traders saw a lot of market uncertainty and a couple of shortened trading weeks. Geopolitical risks hogged the spotlight and fundamentals appeared to take the back seat for the most part of the month.
Forex ECN Hotspot FX reported a meager 1% uptick in May trading activity to $28.1 billion average daily volume (ADV), following the previous month’s 7% decline.
GTX, which is the institutional arm of Gain Capital Holdings, saw a more impressive 9% pickup to $306.5 billion in total trading volumes. However, ADV is actually down 5% to $13.32 billion in May. Still, this is a shade closer to the group’s record $339 billion total trading volume recorded in March this year.
As for FastMatch, which is jointly owned by Global Brokerage Inc, Credit Suisse and BNY Mellon Corp, trading volumes jumped 18% on a month-over-month basis to reach a record $22.5 billion ADV in May. This outpaced their March 2017 trading volume of $19.2 billion and also marks the first time that ADV breached the $20 billion level.
For derivatives marketplace CME Group, trading activity ticked higher by 15% last month to 823,000 contracts per day. The largest gains were seen in JPY contracts, followed by Euro FX futures. Multibank aggregator FXSpotStream yielded a mere 0.2% uptick in ADV for May.
Over in Japan, the Tokyo Financial Exchange actually reported a 1.2% drop in trading activity for the month. However, volumes are still 26.2% higher on a year-over-year basis.
USD/JPY contracts were lower for the month, likely due to the changing market bias for the dollar on weakening tightening expectations and the usual White House drama.EUR/JPY volumes were up by an impressive 40% for the month and 58.1% from May 2016 while pound pairs (GBP/JPY and GBP/USD) showed significant reductions in activity. Traders had been putting more focus on opinion polls leading up to the snap elections this month, and the narrowing lead by the Conservative Party kept pound bulls on edge. Apart from that, the terror attacks in the U.K. also dampened investor activity.
Moving forward, it looks like more geopolitical risks have popped up this month as the rift in the Middle East has taken center stage. The upcoming testimony by former FBI head Comey could also do a number on dollar pairs as this could make or break fiscal reform odds. Any other factors you think might impact FX volumes this June?