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Monday, 17 May 2021 03:49 GMT

Financial and Forex markets during pandemics


(MENAFN - Seoonrock)

As you already know, 2020 has been an eventful year. The Covid-19 crisis has had and continues to have a colossal impact on our daily life and the financial markets.

In early November, when good news broke about vaccines, investors reacted euphorically. Stock prices have risen sharply. At the end of January, the stock markets slowed down slightly. Apple and Facebook have spoken cautiously about the future outlook, and South Korean company Samsung has also hinted that the first quarter will be weak. Add to that the problems of immunization and economic recovery. These reasons are enough to encourage investors to sell.

 

What’s in store for financial markets in 2021

It is not uncommon for global financial markets to outperform the real economy, but it is, of course, important that economic performance follows in the medium term. The Covid 19 is taking a heavy toll on the economies. Fortunately, the impact seems mitigated compared to wave 1. With the new Covid-19 vaccines' gradual administration, a slow normalization of the economy in the second half of 2021 is likely. In any case, the International Monetary Fund is more optimistic than three months ago because vaccinations have started.

In January, questions arose, especially in the euro area, about the speed of vaccination campaigns. Israel, the US, and the UK are clearly in the lead. In emerging countries, deployment is hampered by procurement and logistics issues.

As you know, real interest rates in both the United States and Europe are extremely low, if not negative. They will remain so due to central bank policy, making buying shares more attractive.

China remains one of the biggest "winners" in recent months. It has hardly registered any further Covid infections. Therefore, the country will be able to post excellent growth figures in 2021.

Bonds from emerging countries also continue to appeal to many. Investors prefer bonds in local currencies, which have become cheaper due to the crisis and are currently recovering.

Much of the rise in stock and real estate values have been directly or indirectly linked to the Fed's actions. In December 2020, its balance sheet increased by $ 3,164 billion, reaching a total of $ 7,350 billion, or 63% more than its balance sheet at the height of the decade following the 2008 disaster.

 

The opportunities of the foreign currencies market

As markets collapse under the impact of coronavirus fears, global currencies can also collapse. We have no clear idea when the pandemic will end. Foreign currencies are, therefore, likely to experience larger fluctuations in short to medium term.

On the other hand, pandemic enticed many retail investors to venture into trading via the increasingly emerging Forex broker websites. Just as we have seen on the stock exchange market, the more and more ordinary people, forced to spend more time at home and with often cut income due to pandemics, try their hand in online trading. Hence, the rise in trading volumes and popularity of this type of online trading for individuals.

The volatility in Forex is not a difficulty but an asset. For any serious investor, it is possible to take advantage of it. The difficulty then no longer lies in controlling volatility but making it an opportunity.

Therefore, all that Forex traders need to do is adapt their leverage according to the volatility and trading style. Being able to vary your leverage is a significant advantage of Forex because it will allow the participant to adapt to different market conditions.

Volatility often has a negative image, but it is really just market information. This information is sometimes unfairly neglected because it allows us to adapt to market conditions and make trading more solid. By taking into account volatility, traders can modulate their vision of the market, adapt their trading system, and vary the trading positions' size.

 


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