COVID-19 & the Forex Market
The COVID-19 pandemic of 2020 caused unprecedented disruptions in global financial markets, including the forex market. As countries imposed lockdowns and economies slowed, investors scrambled for safe haven currencies like the US dollar, Japanese yen, and Swiss franc, while riskier currencies and emerging market currencies sharply declined.
At the height of the pandemic in March 2020, the forex market experienced extreme volatility. The US dollar surged as investors sought liquidity, while currencies tied to oil exports, such as the Canadian dollar and Russian ruble, plunged due to collapsing oil prices. Central banks around the world, including the Federal Reserve, cut interest rates and injected trillions of dollars into the financial system to stabilize economies and support markets.
Retail forex trading also saw a spike in activity, as people stuck at home explored trading online. However, the volatile environment created high risks, with rapid price swings causing both large profits and sudden losses for traders.
COVID-19 highlighted how global events can instantly affect currency values, emphasizing the importance of risk management, diversification, and monitoring macroeconomic developments. The pandemic reinforced the idea that in forex trading, geopolitical and economic shocks can be just as important as technical analysis.
