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Forex Market Trends to Watch Out For in 2024

iStock 2088735164 - Global Banking | Finance

Forex Market Trends to Watch Out For in 2024

Predicting global forex market trends for 2024 remains a challenge for anyone due to a variety of factors.

Geopolitical developments, fiscal policy shifts, economic data indicators, emerging market performances, and adoption of technology are some of the major factors that could shape the global forex markets in 2024.

Let’s dive in!

US Dollar to Remain Strong

Despite several fluctuations, the USD Index (DXY) is trading at 102.88 as of now. The recent US economic data, the inflation rate of 3.2% for February 2024, the job market, and other indicators meant the FED would keep up the interest rate for now.

It means the US Dollar will continue to shine in the mid-term, at least. Most experts agree that the FED will keep the interest rates unchanged until May 2024.

However, the recent comments from the FED Reserve Chair Jerome Powell suggest a hawkish stance on interest rates and may further see a few hikes as well.

Even if the FED starts easing the interest rate, the USD will remain strong through the first half of 2024 and will remain resilient for the rest of the year too.

EUR/GBP Will Continue to Underperform

The economic and combination of fiscal policy effects mean both the Euro and GBP will remain under pressure in 2024.

The Eurozone continues to witness high inflation, a stalled economic scenario, and weak growth indicators. The European Central Bank may start easing interest rate cuts sooner which could further weaken the Euro against the USD and other regional currencies like the AUD.

The Bank of England (BoE) will also start decreasing its central interest rate albeit the inflation remains sticky. Once the interest rate cuts are digested and the market feels comfortable with the adjustments, Sterling could gain some momentum in the second half of 2024.

Overall, as the USD is set to be forecasted with another resilient year, both the Euro and GBP could face another stiff year.

Geopolitical Turbulence to Fuel Further Uncertainty

A prolonged Russia-Ukraine war, threats of an escalating Middle East war zone due to Israel-Palestine conflict, the US elections and a potential Donald Trump return, and ever-present US-China tensions are some of the biggest factors to fuel further economic uncertainty globally.

Such factors bring more volatility for the forex markets. It means forecasts and predictions about any forex market can change quickly. Despite careful estimates, enormous research, and informed forecasts, the only constant for the year 2024 could be “uncertainty”.

Global Energy and Economic Shifts

More countries are transitioning toward clean energy, and many are relying on natural gas rather than coal and oil. It means the currencies of oil-exporting countries could take a hit in the coming years.

An important aspect that could play a crucial role in the forex markets is the increasing influence of emerging markets. Countries like India, Brazil, South Africa, and Indonesia along with major players Russia and China have long been the proponents of dealing in non-Dollar currencies.

Although replacing the US Dollar as a global currency remains a far cry, investors in the forex markets could see new opportunities and challenges due to these factors.

If investors remain agile, they could see potential opportunities not only with Major currencies but also with emerging market currencies. Remember, market volatility is not always bad for the forex markets.

AI in Forex Trading to Become a New Normal

We have seen staggering historic returns from tech giants like Meta and NVIDIA in the last 12 months or so. That’s mainly because of the global adoption of AI tools in every walk of life.

Forex markets are no exceptions to the use of AI tools. These tools will enable investors to process large and complex data sets, identify patterns precisely, forecast accurately, and help them make informed decisions quickly.

“Integration of AI into trading strategies will be one of the most significant shifts in the forex markets,” said Edward Kendy from BestOnlineForexBroker.com™. This adoption signals a crucial turning point where data-driven decisions become more commonplace, enhancing traders’ ability to navigate complex market conditions.

Although the use of AI tools for retail forex investors hasn’t become common, we’ll see a surge in the use of these tools in the coming years.

Like other fields, the forex markets will adopt these tools cautiously until their authenticity and reliability are proven. However, the increased influence of AI tools combined with the existing trading software means the retail forex market will further expand in 2024 and beyond.

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