The average daily volume of foreign exchange (FX) trading in the UK, the world’s largest global hub for FX trading, reached $2881bn in October 2019, the highest figure on record.
FX swaps made up the largest share, with an average daily turnover of $1493bn. An FX swap is a contract between two parties who simultaneously lend and borrow an equivalent amount in two different currencies, for an agreed period of time, and will exchange back the currency at an agreed forward rate. In comparison, spot transactions made up $754bn.
The data from the Bank of England’s Foreign Exchange Joint Standing Committee’s semi-annual turnover survey was released in February, and is based on submissions from 27 large market participants active in UK FX markets.
There was a 2% increase in average daily turnover in October 2019 compared with the previous high of $2821bn recorded in April 2019, and an 11% increase on the $2590bn reported in October 2018.
In particular, there was an increase in sterling trading in October 2019, with dollar/sterling and euro/sterling trading reaching record highs of $431bn and $79.8bn, respectively. The increase in sterling trading coincided with a tense period in negotiations over the UK’s departure from the EU. October 31, 2019 had been scheduled as the UK’s (already twice-postponed) departure date but, during October, prime minister Boris Johnson failed to gain clear backing from the UK parliament for an exit deal he agreed with the EU on October 17, and as a result the UK’s departure was postponed again until January 2020.
The UK continues to be the world’s largest global hub for FX trading, responsible for 43% of global trading as of April 2019, according to the Bank of International Settlements’ 2019 Triennial Central Bank Survey of Foreign Exchange Turnover. It is followed by the US with 17%, Singapore and Hong Kong (8% each) and Japan (5%).
The global FX market has grown substantially in the past two decades, with daily average over-the-counter trading volumes increasing from $1239bn in 2001 to $6595bn as of April 2019, the highest global figure recorded. The US dollar remains the dominant global currency, making up one side of 88% of all trades. The euro, the yen and sterling were the three most common currency pairs with the dollar, making up 24%, 13.2% and 9.6% of trades, respectively.
