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Retail FX volumes slide in July; more of the same forecast for August

Retail FX volumes were hit hard last month and are expected to remain at low levels, mirroring the decline in activity across the industry, according to LeapRate, the online forex analysis firm.

LeapRate’s Retail FX Volume index estimates that average daily trading volumes in the sector dropped 10.5% to $175 billion, the second-lowest level this year after April.

“As things appear so far in August, we would expect a similar low volume number for August as well,” warns Gerald Segal, managing director at LeapRate.

 Retail FX volumes retreat in July

 Source: LeapRate

July’s slowdown followed healthy volumes in May and June, as a pick-up in volatility amid concerns about the future of the eurozone boosted activity in the FX market. And EURUSD finally broke out of the ranges that had held for the first few months of the year, as worries mounted over the euro membership of Greece and Spain.

However, July saw a return to a low-volatility market, with EURUSD holding to a tight range, while equity markets advanced amid hopes that European officials were coming closer to dealing with the region’s debt crisis.

“The main casualty of July’s slow markets was the institutional sector, which cut back its online trading tremendously – between 25% to 30% – as traders sat on their hands waiting for volatility to return,” says Segal.

“We still did see in July, however, pockets of continued volume growth in fast-growing emerging FX markets, particularly in the Asia-Pacific region.”

That low-volatility environment has continued into August, with some measures dropping to a record low, as risk appetite was boosted by the pledge from Mario Draghi, European Central Bank president, to do “whatever it takes” to save the euro.

That should keep the pressure on volumes across the board.

LeapRate calculates its FX volume index using proprietary formula. It gathers data from activity levels reported by various FX retail brokerages, similar activity levels announced by other FX aggregators and settlement firms, as well as anecdotal evidence.


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