As is commonplace for August, trading volumes at Fastmatch were more or less flat when compared to July. The total amount even increased by 1.5 percent to reach $447.5 billion, but due to the number of trading days last month the figure is not representative of performance. The more precise average daily volumes (ADVs) metric declined by 3 percent to $19.5 billion per day.

The figures were significantly higher when compared to last year, growing 20 percent. Despite the traditional seasonal decline in trading activity, performance continued to be brisk, in line with significantly higher interest in foreign exchange during 2018.

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CBOE FX Growth

Looking at the CBOE’s foreign exchange subsidiary formerly known as Hotspot, we see a different picture. Total trading volumes have increased by 10 percent when compared to July, netting $802 billion, while average daily volumes ticked higher by 5 percent to $34.9 billion. Both numbers were higher by 29 percent when compared to 2017.

Emerging markets FX (EMFX) has been the dominant theme in August as Turkish president Erdogan has committed to usurping power in the country. His interference in the job of the central bank has yielded significant pressure on the Turkish lira. Contagion followed, spreading the turmoil to other emerging market currencies such as the South African rand and the Mexican peso.

Overall Trends

With US labor day ahead of us, activity on the foreign exchange market is expected to rebound in the coming weeks. The turmoil in Turkey is nowhere near over, while the US Fed is expected to hike rates twice more this year. Chairman Powell has to show to the market that he is politically independent, while President Trump is trying to jawbone the US dollar lower.

The foreign exchange market has been much more active in terms of volume when compared to 2017. Volatility peaked in the first half of the year but the new catalysts which are on the horizon could see increasingly dynamic markets causing even more activity across the institutional space.