The ability to buy and sell international exchange whenever needed with the minimal market impression is seen by currency traders as the most significant challenge for this year, according to an annual client survey by JP Morgan published Thursday.
In a year when wider market volatility has dropped to record lows because of considerable central bank liquidity in international markets, worries about the availability of market liquidity topped the list of issues dealing with Forex traders for a second consecutive year in the U.S. bank’s yearly survey.
The views of the largest 650 institutional trader purchasers, mostly targeted on the $6.6 trillion a day Forex markets.
While market liquidity can seem rich in calm periods, it may dry up immediately, especially in unstable times, after years of cost-cutting and growing competition that has pushed down the number of market entrants.
Perhaps the biggest issue is the fall in market volatility, with an index measuring forex market swings close to record lows, clutching the spreads that banks charge when rating currencies.
Among issues in regards to the year ahead, the availability of market liquidity was chosen by 33% of respondents, receiving nearly twice as many votes as the following issue about workflow performance that Forex markets will confront this year.
Currency markets have seen more incidents of sudden market swings in market prices in recent times, with the Japanese yen and the Swiss franc waving wildly in the opening months of 2019, followed by the Turkish lira in August.