Forex Trends In 2019
Today, let`s talk about the prospects for development of the financial markets, including Forex, in 2019. What direction will choose a greenback? What will happen to the UK after Brexit? Where will the oil prices go? Many traders are concerned about these and many other questions. We contact the analytical department of AMarkets to get complete answers to them.
Let’s start with a discussion of one of the main engines of the global financial market – US dollar, the dynamics of which is 100% likely to affect all foreign exchange assets.
What changes are we in for at the Forex market in 2019?
The American economy is growing and this is a well-known fact. But everyone also knows that its growth has been lasting for more than one year and it is coming to its maximum values after which the correction begins. In addition, it should be remembered that the global economic system shows signs of slackening, which may begin with a slowdown in the US currency. In response, the Federal Reserve has already suspended the growth of the main interest rate, which increases the chances of a negative scenario for US dollar.
The next aspect is normalization of the monetary policy of the European Central Bank, namely curtailment of the QE program and increase of the interest rate (European Central Bank follows in the footsteps of FRS). If the European Central Bank takes such a step, it will also have a negative impact on the dollar, especially in the pair with Euro. In short, the logic is the following – most likely, US currency will fall rather than grow.
What assets are better to trade in 2019?
Now,when we have dealt with the main driver of movement in various markets, let’s look at the assets that would be interesting for investment in 2019. The precious metal has not been in great demand among investors in recent years. Last year its value fell from $1,300 to $1,200. However, according to experts of AMarkets (website), if we take into account the volatility of stock markets and inflation risks, investors can start looking for protection in gold, and this year the precious metal will probably be able to regain the role of a low-risk asset.
During the current year the stock market is the most attractive for investors. However, even fans of investing in stock market indexes should exercise caution. Despite the fact that the American stock market after a decade of constant growth is now showing very high volatility (hundreds of points on the index S&P 500) and has adjusted from the historical maximum values of almost 10%, it is too early to leave it without attention.
What main events are we in for in 2019?
So, what should we expect in 2019? It is obvious that the global economy is showing a decline in growth. Most likely, this will be reflected in a smooth decline in the main forecasts. According to IMF and OECD forecasts for 2019, global GDP growth should reach 3.5%. But, probably, year 2018 will remain the highest point in the growth of the world economy. Analysts expect that the downside risks in the global economy will increase this year. The situation of the Japanese and EU economy will also remain adverse. Unfortunately, these countries could not avoid the policy of negative rates.
Regarding the US economy, it is worth noting that the program of economic stimulation has reached its peak and will soon begin to decrease gradually. In the direction of recession, a trend is already unfolding in the automotive industry and the housing market. We should note that these sectors are most susceptible to interest rates. If GDP shows a positive trend in June this year, it will be the longest period of growth of the US economy. But, obviously, the highest point of growth is behind us, and till the end of the first half of the year the risks of recession will grow significantly.
This year, the US regulator will not be able to tighten monetary policy further, as the cycle of interest rate growth has almost reached the point of reversal in the United States. If there is a large-scale decline in the market of shares and/or securities, the Federal Reserve will have to introduce the expansionary measures. We will not be surprised if the Federal Reserve returns to the QE program, which will be the fourth in a row.
How may it affect the US currency?
If interest rates and economic growth in the United States really approach the maximum, this will also apply to greenback. Under this scenario the EUR/USD rate may reach 1.20 and even 1.30. The dollar is opposed by divergence in the trends of monetary policy and economic growth, and some feuds in the U.S. government, in anticipation of the presidential elections scheduled for 2020, carry a great risk for the investment of all assets that are connected with the dollar in some or other way. Certainly, we can note that the Eurozone is also subject to political risks. In view of the developments in some Eurozone countries (the UK and Italy), there are doubts about the long-term sustainability of the EU.
Regarding Britain, experts expect «pure Brexit» without serious negative impact on economic indicators. On the contrary, the British economy finished year 2018 on the rise: the growth of average wages have accelerated up to ten years maximum values, the employment rate is at the highest level, retail trade is showing steady growth, and there are optimistic forecasts by volumes of industrial production. In current year sterling has every chance to grow stronger than expected.
What should you pay attention to?
Amarkets experts believe that in the first half of 2019 emerging markets will show better dynamics than in the second half. This can be explained by seasonal factors and structural risks. In general, the risks are associated with increased volatility and a decrease in macroeconomic indicators (unlike last year, when the main risk came from the growth of interest rates).
At the same time, there is a possibility that in 2020 the global recession may be higher than 50%. Most likely, in this year the problem of trade confrontations and geopolitical tensions will not be as relevant as in the past/ That`s why the strategies of «targeted selection» are the most preferred.
How to choose a Forex broker right?
Consider, what criteria are supposed to be used to choose a Forex broker. Please keep in mind, that a broker is your representative on an exchange. He is whom you will execute all the transactions through, so it’s very important to pay attention to the following aspects:
- Safety. One of the hallmarks is the solid reputation. You shall study references of other traders, which are cooperating with some or other company already or dealt before.
- Study the broker’s commissions
- Make sure that the spreads and swap amounts are profitable for you. The safe broker companies normally offer spread types to choose: fixed or variable.
- Leverage level size. Despite of the fact that a high leverage level involves high risks, if the seed capital is small, one may increase his initial deposit using a high leverage level. Almost all dealing centers offer the leverage level of 1 to 500, which is not bad value.
- Small requotes, no slippage and short terms of transaction execution. The quickness of transaction execution essential, so many broker companies do their best to minimize this value. AMarkets broker for instance offers this value of 0,03 seconds.
- The quality of connection to the server. It’s crucial for the connection to be stable. You’d better avoid a broker with lame connection, especially at critical moments.