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11 Rules of Risk Management. Ultimate Guide



Dear Clients and Partners,

As it has been mentioned lots of times, working on financial markets implies high risk; in order to become a successful trader, one should minimize potential risks. This article is devoted exactly to reducing them. I would like to mention that this list of actions was suggested by one of the Stocks&Commodities authors George R. Arrington.

Let us have a look at the list of rules necessary for minimizing possible losses. I think that if you trade or have ever traded before, you have used at least some of them, perhaps unconsciously.

1. Before opening a trade make a thorough analysis

Before putting your capital in danger, you should make sure that you have full information and realize well why you want to open the trade. Aside from a detailed analysis of charts, you should form a clear idea of the amount of capital you are ready to risk in this particular trade and of the point, where you are planning to enter the position, for the trade not to become losing even if the market turns against you.

Carrying out the analysis, prepare a list of instruments with a description of reasons for opening the trades and the levels of entrance and exit (if the number of your open positions is scarce, you can keep this list in mind). Upon calculating the risks, cross out too risky ones and those with ambiguous signals. This is the way to make a preliminary selection of trades and eliminate the least efficient of them.

2. Make a trading plan

What is more: if you put effort into creating the plan, stick to it. Each and every one speaks a lot about trading plans, though the views on their efficiency differ radically. Anyway, a plan is necessary as it helps avoid spontaneous actions, performed emotionally and leading to unreasonable losses. Having a well-drafted plan and following it, you will be insured from impulsive actions and will gain confidence.

What is the plan comprised of? It is basically a list of your everyday operations in accordance with your trading style. You have to make an investigation and create a method fitting you in all details, then write it down.

What is more, you should describe acceptable risk for every position and for all trades together, as well as your approximate goals, justifying the losses. If you embed a 2% risk into a trade and receive 1% on exit, you compromise your position at once, because sooner or later your losses will eat up your profit, and the trade will become losing. If during trading you deplete your loss limits, it would be wise to make a pause, exit the market and think about what has happened.

One more important hing: if at a certain moment you realize that the meaning of market events escapes you, do not follow the plan blindly, close all positions and wait for the situation to stabilize and become clearer. Also, do not open trades on the basis of someone’s view or advice, act independently after a thorough analysis of the situation.

3. Diversify your assets

Let us recall one more method, well-known bur not always used – diversification. It allows to decrease risks significantly, acting in two directions:
  • regulating risks by the volume of opening trades;
  • spreading risks between various instruments.
As for the volume of positions, one thing that you definitely should not do is placing all funds in one trade. Define the risk level for each position and limit it by a Stop Loss. Speaking about instruments, try to create a range of assets with the least correlation between each other, so that their price fluctuations and trend directions seldom matched. This way you will diversify risks and avoid dependence on parallel impulses in correlating groups, which bring losses in all trades if the market goes negative.

4. Do not put all your savings on your trading account

It is recommended to use only part of your capital for trading. As the saying goes, do not put all your eggs in one basket. What is more, if a trade looks especially appealing, still do not be tempted to open it for the whole deposit, as the market may turn against you any moment. Make sure you have enough money on your account to keep the trades open easily. It is best to have some reserve on a separate account in order to restore the margin quickly in case of an undesirable price movement. Some traders purposefully open several accounts for trading or deposit the main account for such a sum that will let them open just one or two trades to avoid the temptation of putting all money in trading.

Read more at R Blog - RoboForex

Sincerely,
The RoboForex Team
 
Join the “$1,000,000 to RoboForex partners” 2024 promotion



Dear Clients and Partners,

We remind you that all RoboForex partners can take part in our grand promotion and win cash prizes.

60 winners each month stand a chance to win up to $15,000 for their exceptional performance!

RoboForex Partner Program:

Unmatched industry-leading partner program.
High commissions for attracting clients and fostering your growth.

Dates:

From June 2023 to March 2024, all RoboForex Partners will have a chance to win cash prizes.
Each month, you'll automatically receive coupons to participate in the promotion.

How Winners Are Chosen:

Let the market decide! The 60 winners will be determined by the closest mathematical match of coupon numbers to the closing prices of selected stock combinations on the first Friday of each month.

Earn with RoboForex and receive prizes!

Read more at RoboForex Website

Sincerely,
The RoboForex Team
 
2024 Crude Oil Forecast: Analysing Market Trends and Price Predictions



Dear Clients and Partners,

On 11 January 2024, we looked at the current trends in the oil market and examined the key factors that influenced the oil price performance in 2023 and are likely to impact it in 2024. We conducted a technical analysis of Brent and WTI charts and shared experts’ long-term forecasts on oil prices.

Influential factors on crude oil prices in 2023-2024

OPEC+ policy

The Organisation of the Petroleum Exporting Countries (OPEC+) made active efforts throughout 2023 to support global oil prices, with its share in global oil supplies exceeding 40%. Saudi Arabia’s voluntary output cuts of 1 million barrels per day (b/d) in 2023 demonstrate the country’s leading role in promoting a policy of output cuts to support oil prices.

The latest online meeting of OPEC+ members was held on 30 November 2023, where agreements on output cut commitments were reached. OPEC+ announced following the meeting that total restrictions would amount to 2.2 million b/d for eight oil-producing countries.

However, it is worth noting that discussions were challenging. Several OPEC+ members announced they were not ready to reduce commodity output in 2024. Angola’s government decided to exit the organisation at the beginning of the year, while Brazil is expected to join OPEC+ in 2024.

The failure of OPEC+ members to reach a consensus on overall output cuts for all member countries may pose a risk to oil quotes. It has become apparent that some members find it increasingly challenging to commit to further cuts. Whether the organisation can overcome the existing disagreements and pursue a coordinated policy to support commodity prices remains to be seen in 2024.

Global oil demand and supply

The Energy Information Administration (EIA) expects global oil demand to increase by 1.39 million b/d to 102.46 million b/d in 2024. The expected demand increase will primarily be attributed to Asian countries, with China and India being the largest consumers.

The EIA also forecasts that the global oil output will increase by 0.61 million b/d in 2024, reaching 102.34 million b/d. The Energy Information Administration estimates the market will experience a small deficit at the beginning of 2024 due to the OPEC+ restrictive policy, averaging 210 thousand b/d. However, the market is expected to find a balance by the end of the year.

Sanctions policy

The EU ban on maritime imports of Russian crude oil due to Russia’s full-scale military incursion into Ukraine came into effect in December 2022 with a price cap of 60 USD per barrel. An embargo on Russian petroleum products was introduced in February 2023. These sanctions, aimed to weaken the aggressor country, contribute to oil price growth in the long run.

In November, the US Department of State announced new sanctions against the Iranian oil and gas sector amid the Israel-Hamas war. It is worth noting that Iran supports the Palestinian group Hamas and Lebanese Hezbollah. The sanctions are expected to reduce oil exports from Iran, currently amounting to about 1 million barrels daily.

Geopolitical risks

When referring to the geopolitical environment in recent years, it is essential to point out events such as Russia’s full-scale incursion into Ukraine in 2022 and the Hamas attack on Israel in 2023. There are no indications that the Russia-Ukraine war and the Israel-Hamas conflict are about to end. Furthermore, tensions between China and Taiwan and North Korea and South Korea might escalate.

The existing or imminent conflicts mentioned above involve the US, China, and Russia to some extent, indicating a potential threat of a significant oil price leap. It is worth considering scenarios that might lead to other less predictable geopolitical events that can strongly impact the oil market.

Read more at R Blog - RoboForex

Sincerely,
The RoboForex Team
 
2024 XAU/USD Forecast: Analysis and Future Outlook for Gold Trends



Dear Clients and Partners,

On 17 January 2024, we looked at the prevailing gold (XAU/USD) market trends, exploring historical trends and the key factors influencing the price of the precious metal. We conducted a technical analysis of the price chart and uncovered expert opinions on the gold price outlook for 2024.

Historical analysis of XAU/USD prices

Let us take a look at the gold price performance over the last 140 years:
  • Since 1887, during the gold standard period, the US government fixed the gold price at 20.67 USD per troy ounce. After abandoning the gold standard and devaluing the dollar in 1933, the cost of an ounce increased to 35 USD and remained at this level until 1967
  • Later in the 1970s, gold prices increased significantly due to international economic and geopolitical instability. From 1971 to 1980, quotes skyrocketed by over 1600%, from 35 to 800 USD per ounce
  • In the 1980s-1990s, gold prices corrected downwards as the global and US economies experienced a period of relative stability, with declining oil prices
  • In the 2000s, the price level remained relatively stable until the 2008 financial crisis, when quotes soared again from 800 to over 1,900 USD per ounce in 2011. The surge in prices and the end of the crisis were followed by a strong downward correction towards 1,100 USD
  • From 2012 to 2020, the global economy and stock markets showed steady growth, with gold trading within a sideways price range from 1,100 to 1,400 USD per ounce
  • In 2020, driven by the COVID-19 crisis, gold quotes resumed their upward movement, surpassing 2,000 USD per ounce
  • In December 2023, amid rising inflation and geopolitical turbulence, the gold ounce set an all-time price record of 2,150 USD
Key factors influencing XAU/USD
  • Economic indicators. This includes inflation, interest rates, unemployment, GDP, and other economic data. For example, a high inflation rate and economic instability may boost the demand for gold as a store of value
  • Geopolitics. Investors traditionally consider gold a safe-haven asset against risks and uncertainty during wars, conflicts, sanctions, political and geopolitical instability, and tensions. Demand for gold typically increases during such periods
  • New financial technology. For example, the development of the cryptocurrency market may negatively affect the demand for the precious metal. Investors might invest in digital assets instead of gold, lured by the potential for high returns
  • US dollar exchange rate. As global gold prices are set in the USD, the US currency exchange rate fluctuations may also impact the price of the precious metal. Gold prices often fall when the US dollar strengthens since it becomes more expensive for buyers. Conversely, with a weak USD, gold prices may be on the rise
Expert XAU/USD price predictions for 2024 and beyond
  • UBS Global forecasts that gold prices will rise to 2,250 USD per ounce by the end of 2024
  • According to Saxo Bank’s specialists, the precious metal quotes will reach the 2,300 USD mark in 2024
  • J.P. Morgan expects gold prices to stand at 2,175 USD by mid-2024 amid potential rate cuts by the Federal Reserve
  • According to Wallet Investor, the quotes will hover at 2,058 USD by the end of 2024, rising to 2,104 USD by December 2025
Read more at R Blog - RoboForex

Sincerely,
The RoboForex Team
 
Boost your earnings with Infinity program for Partners



Dear Partners,

We are thrilled to announce the launch of our Infinity Program for partners!

Get up to 85% of the average spread

for every trade your clients close. Offer better spreads, and receive Infinitely better payouts!

You also receive 20% from swaps

If your clients prefer mid- or long-term strategies, keeping their positions open for some time, you still receive a 20% reward from swap daily.

Payments increased
up to 5.4 times



The percentage increase is calculated based on the previous conditions of the RoboForex Partner program

Benefits

Extra income through swaps
Earn an additional 20% through your clients' swaps on top of your commission.

Diverse investment options
Let your clients choose from top-performing assets, including Gold, EURUSD, DE40, USTech, and more.

Use the new partner's calculator
Use the new partner's detailed calculator to check your potential earnings.


Infinity is now available to newly registered RoboForex partners as the main program. The existing partners previously enrolled in the "VIP" program will be switched to the Infinity Program automatically. To change the type of your Partner program (if it is not a "VIP" program), please contact the Partnership department.

Be a part of our community and unleash the boundless earning potential through our Infinity Program. Explore the world of Infinity today and discover a more rewarding tomorrow!

Read more at RoboForex Website

Sincerely,
The RoboForex Team
 
USD/CAD: Analysis of the Current Trend and Expert Forecasts for 2024



Dear Clients and Partners,

USD/CAD is among the most sought-after currency pairs in international trade. On 25 January, we examined the key factors influencing the pair’s exchange rate, analysed the dynamics of price changes in 2023, conducted a technical analysis of its chart, and explored expert forecasts for 2024-2025.

Overview of the USD/CAD currency pair

USD/CAD shows the ratio of the US dollar (USD) to the Canadian dollar (CAD). Its quotes indicate how many Canadian dollars must be paid for one US dollar. When the pair exchange rate rises, this means that the US dollar is strengthening against Canada’s currency. When the exchange rate drops, this signals that the Canadian dollar is on the rise against the US dollar.

Trading characteristics of the USD/CAD pair
  • The currency pair is traded around the clock from Monday to Friday, with significant trading volumes and maximum volatility during the American trading session. During this period, the US and Canada release the most crucial economic statistics that have a significant impact on the pair's exchange rate
  • USD/CAD is quite volatile, characterised by average daily movements ranging from 800 to 1,000 pips. During periods of intense global market movements, the pair’s volatility may increase to 2,000-3,000 pips per day in the short term
  • USD/CAD is one of the major currency pairs, which is why the spread is small, thanks to its popularity and high liquidity. In a typical market environment, the spread ranges from 10 to 15 pips in popular ECN accounts
The Bank of Canada’s monetary policy

The Bank of Canada has actively combated mounting inflation from March 2022 to July 2023 by tightening its monetary policy. It is worth noting that the interest rate was raised nine times over this period, with the last increase at a meeting in July 2023. Since then, the rate has remained at 5%. The interest rate hikes have supported the Canadian dollar exchange rate. In its monetary policy, the Bank of Canada focuses on achieving the inflation target of 2%.

The country’s CPI decreased in the second half of 2023, falling from 8.4% in July 2023 to 3.4% in January 2024.

2023 USD/CAD price market outlook

The pair showed mixed trends in 2023, starting the year at 1.3545. During the subsequent months, quotes ranged from 1.3100 to 1.3900. With no clear long-term trend observed during the year, the price underwent local movements within the above range.

The decline in the quotes was attributed to the Bank of Canada’s rate hike policy and stable oil prices, which remained above 70 USD per barrel, supported by the OPEC+ restrictive policy. A growth driver for the pair’s exchange rate was the Federal Reserve’s interest rate hike policy and the strengthening of the US dollar against other currencies.

Strategies for Trading USD/CAD
  • Trading with fundamental analysis. This approach involves analysing factors such as the publication of economic statistics, expectations of interest rate changes, or the current trend in global stock and commodity markets. Typically, this is a long-term trading strategy, with positions held for several weeks to a year or more
  • Trading with technical analysis. This trading method is based on carefully analysing the currency pair's chart. Classical technical analysis is applied here (trend lines, price patterns, support, and resistance levels), along with various proprietary methods, candlestick combinations, Price Action patterns, and others. Usually, trading with technical analysis tools has a medium-term or short-term nature
  • Trading with indicators. This trading strategy uses signals from various technical indicators. This can be a single complex indicator or a combination of several simpler ones. Based on their signals, the direction of trading, entry, and exit points are determined. Indicator signals can be applied for automating trading in specialised programs – advisors
Read more at R Blog - RoboForex

Sincerely,
The RoboForex Team
 
AUD/USD: Analysis of the Current Trend and Expert Forecasts for 2024



Dear Clients and Partners,

AUD/USD is one of the key currency pairs in the international foreign exchange market. On 1 February 2024, we examined the primary factors influencing the pair’s exchange rate, analysed its price performance in 2023, and explored expert forecasts for 2024.

Overview of the AUD/USD currency pair

AUD/USD is one of the key currency pairs in the international foreign exchange market. On 1 February 2024, we examined the primary factors influencing the pair’s exchange rate, analysed its price performance in 2023, and explored expert forecasts for 2024.

Trading characteristics of the AUD/USD pair
  • Trading hours: The pair is traded round the clock except for weekends, with the highest activity observed during the Pacific, Asian, and American trading sessions
  • Volatility: AUD/USD is characterised by moderate volatility, with average daily fluctuations ranging from 500 to 700 pips. However, during times of crises and stock market swings, volatility may increase to 1,000-2,000 pips per day for a short time
  • Spread: thanks to high liquidity and moderate volatility, the spread for AUD/USD is minimal, often less than 10 pips in popular ECN accounts
Key factors influencing the AUD/USD quotes

The Reserve Bank of Australia’s monetary policy

The Reserve Bank of Australia has been tightening its monetary policy to combat inflation since May 2022, raising the key rate from 0.1% in April 2022 to 4.35% in November 2023. Subsequently, the regulator paused to assess the dynamics of inflation rates, keeping the indicator unchanged. In its policy, the central bank aims to reduce the inflation rate to the target range of 2-3%.

The Q4 2023 consumer inflation report released on 31 January 2024 showed a decrease in the indicator to 4.1%. It is worth noting that the reading was 5.3% in Q3. According to the Reserve Bank of Australia's estimates, the inflation rate is decreasing and is projected to return to the 2-3% target in 2025.

The US Federal Reserve’s monetary policy

The US Federal Reserve is also combatting inflation by tightening monetary policy, with the regulator aiming to decrease the indicator to 2%. From the beginning of 2022 to July 2023, the interest rate has gradually risen from 0.25% to 5.5%, significantly impacting the exchange rate of the US dollar, which has strengthened markedly against many world currencies.

The inflation rate is gradually decreasing thanks to monetary tightening, and high interest rates exert pressure on the US economy. Consumer inflation (CPI) was down to 3.4% in January 2024. At its latest meeting on 31 January 2024, the Federal Reserve left the interest rate unchanged at 5.5%, with the regulator’s officials noting that they are ready to cut the rate if inflation steadily slows down.

Dynamics of prices for natural resources

Despite being relatively young, Australia’s economy holds a prominent position in the global rankings. The country is rich in diverse natural resources, including gold, iron ore, diamonds, minerals, uranium, and coal deposits. The export of these resources plays a pivotal role in bolstering government revenue. Therefore, an upswing in the global prices of commodities like iron ore, industrial metals, gold, silver, and coal contributes to strengthening the Australian dollar exchange rate and fuels the growth of the AUD/USD currency pair.

Conversely, a decline in the prices of natural resources, often triggered by a global economic crisis, results in a decrease in the Australian dollar exchange rate and the AUD/USD quotes. It is worth noting that the AUD/USD currency pair is correlated with the price of gold. Rising gold prices usually contribute to strengthening the Australian dollar and driving up the pair’s exchange rate. In contrast, a decline in gold quotes is commonly followed by a drop in the Australian currency exchange rate and the pair’s quotes.

How to Trade AUD/USD
  • Trading based on fundamental analysis. This method relies on examining significant factors such as economic statistics, expectations of central bank interest rate changes, and current trends in global stock, currency, and commodity markets. It is usually applied in the long term, where positions can be held from several weeks to a year or more
  • Trading based on technical analysis. This method relies on carefully studying and analysing the currency pair's chart. This approach employs classical technical analysis using trendlines, price patterns, support and resistance levels, proprietary methodologies, candlestick combinations, Price Action patterns, and more. Trading using technical analysis tools is generally for the medium or short-term
  • Trading based on indicator signals. This approach makes trading decisions based on signals from various technical indicators. The direction of trading, entry and exit points from positions are determined based on signals from one or several indicators. These signals can be used to automate trading with the help of special programs, such as trading advisors
Read more at R Blog - RoboForex

Sincerely,
The RoboForex Team
 
RoboForex: upcoming changes to the trading schedule (Presidents' Day in the US)



Dear Clients and Partners,

Please note the upcoming adjustments to the trading schedule.

Holiday: Presidents' Day in the US
Dates: 19/02/2024 - 20/02/2024

This schedule is for informational purposes and may be subject to further amendments.

MetaTrader 4 / MetaTrader 5 platforms

Schedule for trading on CFDs on Metals (XAUUSD, XAGUSD) and CFDs on oil (Brent, WTI)
  • 19/02/2024 – trading stops at 7:40 PM server time
  • 20/02/2024 – trading as usual
Schedule for trading on CFDs on US indices (US30Cash, US500Cash, USTECHCash) and CFD on the Japanese index JP225Cash
  • 19/02/2024 – trading stops at 7:40 PM server time
  • 20/02/2024 – trading as usual
Schedule for trading on CFDs on US stocks
  • 19/02/2024 – no trading
  • 20/02/2024 – trading as usual
Schedule for trading on CFDs on US futures
  • 19/02/2024 – no trading
  • 20/02/2024 – trading as usual
R StocksTrader platform

Schedule for trading on US stocks and ETFs
  • 19/02/2024 – no trading
  • 20/02/2024 – trading as usual
Schedule for trading on CFDs on US stocks and ETFs
  • 19/02/2024 – no trading
  • 20/02/2024 – trading as usual
Schedule for trading on CFDs on US indices (US500, US30, NAS100), CFDs on Metals (XAUUSD, XAGUSD), and CFDs on oil (WTI.oil, BRENT.oil)
  • 19/02/2024 – trading stops at 7:40 PM server time
  • 20/02/2024 – trading as usual
Schedule for trading on CFDs on US futures
  • 19/02/2024 – no trading
  • 20/02/2024 – trading as usual
Please take note of the above amendments to the trading schedule as you plan your trading activity.

Sincerely,
The RoboForex Team
 
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RoboForex upgrades the web platform and R StocksTrader app



Dear Clients and Partners,

RoboForex has rolled out a major update to R StocksTrader, an innovative web platform and mobile trading application. Here is an overview of the updates and functionalities now available.

1. 940+ new stocks, including well-known companies across various industries

Technology and Software
  • ANSS.nq (ANSYS Inc.)
  • EPAM.ny (EPAM Systems Inc.)
  • FIS.ny (Fidelity National Information Services)
Real Estate and Infrastructure
  • AON.ny (Aon plc)
  • BXP.ny (Boston Properties Inc.)
  • CPT.ny (Camden Property Trust)
Healthcare
  • DGX.ny (Quest Diagnostics Incorporated)
  • GEHC.nq (General Electric Healthcare)
  • LH.ny (LabCorp)
Manufacturing and Industrial
  • CARR.ny (Carrier Global Corporation)
  • EMN.ny (Eastman Chemical Company)
  • GNRC.ny (Generac Holdings Inc.)
Financial Services
  • RJF.ny (Raymond James Financial Inc.)
  • WRB.ny (W. R. Berkley Corporation)
Materials and Mining
  • SSRM.nq (SSR Mining Inc.)
  • WPM.ny (Wheaton Precious Metals Corp.)


2. Introducing Dividends on CFDs on Indices

Dividends on CFDs on indices are now available, offering you even more opportunities for successful investing and trading.

If you hold a long position, you'll receive a dividend adjustment credited directly to your trading account. Conversely, if you hold a short position, a dividend adjustment will be deducted from your trading account. In both cases, the adjustment is calculated based on the dividend amount and the number of contracts held.

Access a detailed calendar of upcoming dividends directly in R StocksTrader.



3. In-depth financial news and improved analytics

Get updates on both technical and fundamental aspects of the companies you invest in:
  • Latest general news, company press releases, and global financial market coverage (sources include Reuters, Bloomberg, Forbes, Financial Times, BBC, Barchart, etc.)
  • Quarterly, annual, and other mandatory regulatory/SEC reports for publicly traded US companies


4. "Trade Window" update in the mobile app

Order tab:
  • Improved mini-graph with enhanced accuracy and quick filters for period selection
  • Information on trading session timings, reasons for trading unavailability, Commission, and Free Margin
  • Users can input the Order Margin amount for orders in addition to the Volume
  • Take Profit, Stop Loss, and Expiration fields for pending orders are hidden by default
  • Clarified error messages for order placement and rejection
Details tab: additional information such as a company description, contract specifications, trading conditions, and time.
News tab: news related to the trading instrument was added.



Added modal windows for:
  • "Order Confirmation" – to review and confirm final Volume, Cost, Conversion, and Order Margin.
  • "Order Status" – to receive notifications about the executor's status and details of a successful or cancelled order.


Trade on popular global platforms and invest in more than 12,000 instruments from a single account in R StocksTrader!

Read more at RoboForex Website

Sincerely,
The RoboForex Team
 
Foreign Currency Trading 2024: What to Expect



Dear Clients and Partners,

On 8 February 2024, we examined how the exchange rates of the leading world currencies had changed in 2023 and discussed the key factors that will impact their performance in 2024. Additionally, we shared short and medium-term expert forecasts for the major currency pairs.

The strongest and weakest currencies in 2023

In 2023, many central banks were actively fighting inflation, resulting in relatively high volatility in the currency market. According to Visual Capitalist, the Mexican peso (MXN) saw an impressive increase last year, appreciating 14.8% against the US dollar (USD). This development occurred amid aggressive interest rate hikes by Mexico’s central bank. When writing, the interest rate was 11.25%.

The Swiss franc (CHF) also demonstrated steady growth of 9.8% due to geopolitical turbulence. The British pound (GBP), Canadian dollar (CAD), and euro (EUR) strengthened moderately within the range of 2-5% by year-end due to the interest rate hike policy pursued by the central banks.

The Australian dollar (AUD), New Zealand dollar (NZD), and Indian rupee (INR) ended the year with little to no changes, declining slightly by −0.1%, −0.5%, and −0.5%, respectively. The Chinese yuan (CNY) slid moderately by 2.8% in 2023.

The worst-performing currencies of the year were the Japanese yen (JPY), Russian ruble (RUB), and Turkish lira (TRY), which dropped by 7%, 17.5%, and 36.6%, respectively. The low-rate policy influenced the yen; the ruble is under pressure from the sanctions imposed following the onset of full-fledged war in Ukraine, and the lira is struggling due to domestic political and economic challenges.

The US Dollar Index (DXY), showing changes in the US currency value against a basket of the world’s major currencies, ended 2023 with a 2.0% decline.



Key factors influencing currencies in 2024

Inflation and central bank policy

The critical factor affecting exchange rates over the last two years was multiple central banks' aggressive interest rate hike cycles to combat inflation. The US regulator initiated these actions in Q1 2022, with the indicator increasing to 5.5% in less than two years.

Most of the world’s developed countries experienced monetary policy tightening to a similar extent. The Bank of England began to raise the interest rate at the end of 2021, a couple of months before the Federal Reserve, with the rate in the UK reaching 5.25% following 14 consecutive hikes. The European Central Bank began to increase the interest rate in mid-2022, pushing it up to 4.5%.

The central banks of Australia, Canada, and other countries followed suit, while the Bank of Japan was practically the only one among the most prominent regulators to pursue an adaptive zero-interest rate policy. This approach dominated the world for the first two years after the beginning of the COVID-19 pandemic.

US elections

Historically, the US dollar exchange rate tends to rise under Democratic presidents and decline under Republicans. Therefore, the currency market becomes especially volatile in the face of uncertainty surrounding upcoming presidential elections in the US, as stated by Business Insider analysts. This event will determine not only the US policy but also the US dollar exchange rate against other currencies.

Donald Trump is expected to become the leading nominee from the Republican party, having won the primaries in the coming months. He will face incumbent Democratic President Joe Biden in a tightly contested election. Their rematch, accompanied by heated rhetoric and the potential for social conflict, may affect investor sentiment and currency markets. Trump is committed to higher tariffs, which will push up inflation and increase the US dollar exchange rate, putting the Chinese yuan, euro, and Mexican peso under pressure.

Trends in the global economy

The International Monetary Fund projects that global economic growth will remain at 3.1% in 2024 and rise to 3.2% in 2025. Higher rates and a withdrawal of fiscal support amid high debt exert pressure on economic activity.

In most regions, the inflation rate is slowing down faster than expected amid unwinding supply-related issues and restrictive monetary policy. Global inflation is projected to fall to 5.8% in 2024 and 4.4% in 2025, with the outlook for the next year being revised downwards.

Read more at R Blog - RoboForex

Sincerely,
The RoboForex Team
 

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