2022 has been a year full of paradigmatic shifts in the financial market. The remnants of the pandemic, the Russian invasion of Ukraine, and the seemingly global inflation have caused a fundamental shift in this decade’s financial structures. The effect can be a return to the forex market for many.
Russian conflict nail in the coffin for a past era
The foreign exchange market was already set to change as a consequence of strangled supply lines and pandemic economies. Then the geopolitical unrest following the Russian invasion of Ukraine happened. Investments in Eastern Europe, as well as China, were on the fence as the conflict started playing out and alliances were uncertain. Investments in the Ukrainian market alone, whose crops are a big international export, were naturally damaged by the war as well.
However, it isn’t just potential fighting countries that have been affected on forex platforms. The entire European market, largely regulated by the Euro (€/EUR), took a deep hit from the following oil crisis as their dependence of Russian oil was unsustainable. The conflict, as well as the inflation and remnants of Covid, has caused the European currency to fall to levels unseen for the past 20 years.
Experts on the current paradigm shift
The global financial state has also been brought up at this year’s big Wall Street meetings, where experts have noted the unique historical era we are in. Ted Pick, co-President of Morgan Stanley, has said this on the matter:
“It’s an extraordinary moment; we have our first pandemic in 100 years. We have our first invasion in Europe in 75 years. And we have our first inflation around the world in 40 years. When you look at the intersection of the pandemic, of the war, of the inflation, it signals a paradigm shift, the end of 15 years of financial repression and the next era to come.”
He then went on to emphasize that the shift won’t happen overnight. Most likely, the changes will start to become apparent in a year or two. However, traders should already be analyzing and strategizing how these events will impact their investments.
What does this mean for traders?
For traders who are focused on the forex market, a paradigm shift can mean a lot of things, especially for those interested in long-term investments. As we’ve discussed above, global events have affected several international currencies on the market, and rising inflation won’t make it easier for national currencies to gain ground.
However, in terms of global and geopolitical turmoil, there are three currencies that are generally considered “safe havens” that traders can turn to. These include the US dollar ($/USD), which is considered the world reserve, as well as the Japanese yen (¥/JPY) and the Swiss franc (CHF).
Ultimately, the safest thing for forex traders to do is to keep analyzing their portfolios and the market at regular intervals to be sure to notice trends and happenings with some margin. Maintaining discipline and diversification in your forex portfolio will be key to staying afloat amidst global financial changes, as well as defined entry and exit points.