IG Group has issued what is expected to be its final Trading Update before it closes its 2014 fiscal year ending on June 1st. Citing weakness in the FX market, IG Group expects revenues to fall below expectations. However, they stated: “Earnings and cash generation remain on track,” due to a decrease in expected operating costs. The top line weakness occurs after the broker forecasted in March that it expected to meet full-year revenue estimates on higher year-over-year growth.
In its statement, IG Group specifically pointed out to a recent drop in volumes as they reported : “Trading has been generally subdued since the Interim Management Statement was published in the middle of March, with the relative weakness most evident in May.” The drop in May volumes occurs after industry wide weakness in the FX markets took place in April. Speaking to trading and sales desks this month, sources have also related to Forex Magnates similar experiences as IG Group, with a few insiders going as far as to say it’s the “slowest market they remember in years.” In regards to IG, the broker did conclude its statement saying that it continues to “make good” on plans it had noted in January and will be reporting updated FY2014 results in July.
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Overall FX volumes have been adversely affected by a decline in volatility as markets have been range bound. The lack of movement occurred even as the US Fed has begun to advance rhetoric about exiting and tapering its quantitative easing policies which was expected to drive volatility back into the markets. However, despite expectations of Fed tightening and higher borrowing costs, interest rates of long dated US debt has actually declined. As such, this has led to a rising belief among traders that despite a reduction in Fed purchases of US debt, other central banks, such as the ECB, have stepped in to bid them higher to ensure the existing low interest rate environment remains.