US Shutdown Intensifies Difficult Year for Currency Trading
The longest US government shutdown on record has significantly affected currency traders, contributing to the worst year for foreign exchange performance since 2005.
Impact of Data Gaps on Trading
Crucial economic data has not been released for weeks, creating uncertainty about the future direction of the US dollar. This lack of information has made traders hesitant to make large bets on currency movements.
Wall Street's Declining Currency Revenues
Before the data stoppage, major financial institutions including Goldman Sachs Group, Morgan Stanley, and Bank of New York Mellon already reported a decline in currency trading revenues in the previous quarter.
Reduced Market Volatility and Trading Challenges
The federal shutdown has delayed the publication of key economic and market positioning data, causing a drop in foreign exchange volatility well below long-term averages. Automated trading funds now face a shortage of high-quality data, leading strategists to postpone forecast updates.
“Foreign-exchange investors are on course for the poorest annual performance since 2005, according to a BarclayHedge index.”
“As a result, foreign exchange volatility has fallen well below long-term averages – a far cry from the wild swings sparked by US President Donald Trump’s global tariff announcement in April.”
These combined factors have produced a rare calm in currency markets amid ongoing uncertainty.
Author's Summary
The prolonged US government shutdown has halted vital economic data, leading to the weakest currency trading year since 2005 and unusually low market volatility.