The outbreak of Covid-19 or Coronavirus in early 2020 has since redefined the financial services industry.
Brokers have been forced to quickly adapt to several changes, both positive and negative.
This includes the FX industry, which saw surges in volumes across the retail and institutional space in Q1 2020.
This trend can be explained by an outflow of volatility, coupled with countries taking major moves to stabilize their respective economies.
In conjunction with uncertainty caused by the virus, most countries also resorted to lockdowns in a bid to stifle the virus’ spread.
At the time of writing, nobody knows whether this tactic will succeed in controlling Covid-19, though its early impact on financial markets is being felt already.
Equity markets across most exchanges effectively crumbled by nearly a third in early 2020, with the worst being seen in March 2020.
Stock markets have since rebounded, though only with the help of broad-based stimulus programs.
Nowhere was this more prevalent than in the United States, with the Federal Reserve resorting to measures not used since the Great Financial Crisis.
This included trillions in bond-buying purchases in a bid to stabilize the economy.
The outbreak of Covid-19 also saw the collapse of the global oil market, which saw futures briefly enter into negative territory.
Highly reduced demand out of China and most economies, as well as a price war between Russia and Saudi Arabia have exacerbated this trend.
Effects of Covid-19 on Brokers
In the retail space, forex brokers have experienced an early surge in trading volumes in 2020.
This can be explained by a large uptick in potential clients, ironically due to stay at home orders and quarantining.
It remains to be seen whether this trend will hold longer term as middle-aged potential investors return to work in 2020.
In terms of other operations, brokers have had to rethink traditional call centers and other mechanisms for reaching clients due to the disruption of the virus.
A push for online call centers and other such support is likely to overtake other methods of dealing with clients with a vaccine as of yet not available.
Longer-term, a looming recession can also potentially impact brokers with the pool of investors once again possibly shrinking.
As the situation of Covid-19 is unprecedented, brokers have joined other entities in a wait-and-see mode.