Daily foreign exchange trading volumes out of London have shrunk by 16 percent from the year prior, to $2.41 trillion in April 2020, the Bank of England said in its latest triennial report on the FX market.
The decline in the average daily volume in the City was broad-based and was reported across almost all currency pairs, instrument types, counterparty types, and execution methods.
FX and Currency Swaps, which are primarily used by market participants for liquidity management and hedging currency risks, suffered the largest falls. This was accompanied by a decrease in turnover by a respective factor of $291 billion (-20%) and $15 billion (-37%) respectively from the previous survey. But compared to the year earlier, the swaps turnover increased by five percent.
One of the primary culprits of the recent fall in April 2020 was also attributed to a drop in spot turnover, which had lost nearly 10 percent since the survey of October 2019. The segment achieved an average daily turnover of $677 billion, the BOE said.
In terms of specific FX pairs across the FX market, the survey’s breakdown shows that all major currency pairs had seen falls in average daily turnover since the last survey in October 2019. Britain’s pound, having seen record highs in London’s last FX industry survey, fell the most activity with average daily turnover for USDGBP and EURGBP coming in at $138 billion (-32%) and $24.7 billion (-31%) respectively.
Brexit negotiations helped send daily trading volumes in the Sterling to a record high in 2019. Increased activity in the UK currency, as well as more FX swap turnover, sent London’s overall FX trading volumes to a record $2.88 trillion per day in October 2019.
Other highlights show that USD/JPY returned to be the next most commonly traded pair, totaling $313.5 billion, down six percent on a year-over-year basis from its counterpart figure in October 2019.
The 28 largest banks active in the UK forex market participated in the survey, which the UK central bank conducts twice per year, in spring and autumn.