The foreign exchange market in the United Kingdom

The forex market is the largest financial market nowadays, which mainly focuses on trading with currencies. Broadly speaking, the development of the internet and technologies has encouraged major financial institutions, as well as individuals around the globe to get involved in the process of selling and buying currencies – converting one currency’s value into another. One of the advantages of this portal is that it’s open 24 hours a day 7 days a week. Here you will come across some major currencies such as EUR, USD, JPY, AUS, GBP, and much more.

Now let’s be more specific about the UK financial market itself, which as you already know, has been possessing one of the top positions over the past years. Between the years 2016 and 2019 UK along with other countries across the world experienced a huge rise in the daily turnover. Several factors had an effect on this growth. The main product contributor was the large increase in FX swap volumes, but technical factors also accelerated this process.

Apart from Britain, the biggest markets involve Singapore (decreased by 5%), Hong-kong (increased by 10%), and Japan (expanded by 2%).

In this comprehensive article, we discuss the UK in the global context and also, mention the main components of trading growth. So, whether you are a newbie in this field or a proficient, stick with us to obtain handy information.

Recent surveys and trading volumes

In order to give a precise picture of the recent trading volumes and features the BIS conducts a survey and collects information from different monetary services and central banks. This helps illustrate the types of trades which take place and the dominant trading positions.

According to the 2019th study, the UK is presented as a global financial center that possesses the main position in both international and national FX trading. Is also worth mentioning that its market share felt a rise of 50% compared to 2016.

The forex market is a complex platform that involves forex dealers, banks, brokers, and nonbank dealers who interact and connect by phone or terminals. It’s worth mentioning that the market is risky itself and you must be very cautious when making a decision. That’s why, If you want to venture into currency trading and don’t know where to start from, you can take a look at Axiory broker, where you will find out information about the importance of funds security, obtain daily technical analysis reports as well as guidance on the trading sector.

The UK market in a global context

As e already stated, the FX market in this region rose dramatically over the past several years. 43% of turnover in the foreign exchange market is coordinated by UK-based traders. As was the case in most of the countries, the USD remained one of the most traded currencies in the UK too. The survey suggests that above 90% of the trades involve USD as the main currency. It’s not a surprise that USD/EUR and GBP/USD are the most traded currency pairs across this country on the Forex portal accounting for an indicator of 30%.

Apart from the measures mentioned above, other FX indexes, such as outright forwards, have felt a rise too. The term “outright forwards” represents a contract that allows the buyer to purchase or barter a currency at a fixed rate hereafter. This feature has increased by 4% in a year in the UK, compared to 2018.

Generally, FX swaps are characterized to have a maturity of 7 days, but in the case of outright forwards, we deal with a broader range of maturities. In this precise region, the most well-known (36%) outright forwards present a maturity date of above 7 days to one month. Wider maturities, such as the ones from one to three months, account for a total market share of 32%. What concerns the short-term contract outright forwards, these represent a 22% share and are up to 7 days.

Till this moment we have discussed the various trading locations and features, but now is time to focus on who is trading. In the UK the contracts are usually composed between financial institutions (organizations that don’t especially involve banks or non-financial institutions) and dealers, this accounts for a total of 58% of the whole national FX record, which has increased by 45% compared to the data from 2016. To take this even further, the non-reporting banks have the greatest share among “other financial institutions”.

Brexit Battleground

Not long after the agreement of Brexit, the forex industry has become a battleground of negotiations between the UK and the European Union. Some leaders of the European Union consider that the banks in Britain should lack the right to sell FX-produced products. Due to that fact, some banks in the UK are transferring some of their services to European cities so as not to lose the possibility to sell services to European investors.

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