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The foreign exchange market size is forecast to increase by USD 516.48 billion at a CAGR of 10.31% between 2023 and 2028. The market is a dynamic and complex ecosystem driven by various monetary policies, regulations, and global economic indicators. Central banks play a pivotal role in shaping market trends through interest rate adjustments and inflation targeting. Regulatory bodies impose stringent regulations to ensure market stability and investor confidence. Monetary policies, inflation, GDP growth, and interest rates are key factors influencing currency price movements. Global banking institutions and investor confidence significantly impact market perception and liquidity. However, the uncertainty of future exchange rates and geopolitical risks pose challenges for market participants. Effective risk management strategies and real-time market analysis are essential to navigate the intricacies of the market.
The market, also known as Forex or FX, is a global decentralized marketplace for the trading of currencies. It involves the buying, selling, and exchanging of different currencies at current or agreed-upon prices. The foreign exchange rate refers to the value of one currency against another. Financial institutions, corporations, non-financial customers, individuals, retailers, and international trade participants are key players in this market. Currency swaps, interest rate differentials, investment flows, economic indicators, political developments, and balance of payments are some factors influencing the market. Monetary interventions by central banks and speculation can also impact foreign exchange rates. The foreign securities market and IoT insurance market are related markets that intersect with the market.
Further, the market operates 24 hours a day, with the highest trading volume occurring in the Asian and European sessions. Banks and corporations use the interbank network to facilitate transactions. Trading in the forex market can be complex, with various risks involved, including market risk, credit risk, and operational risk. Overall, the market plays a crucial role in facilitating international trade and investment.
The market research report provides comprehensive data (region-wise segment analysis), with forecasts and estimates in "USD billion" for the period 2024-2028, as well as historical data from 2018-2022 for the following segments.
The reporting dealers segment is estimated to witness significant growth during the forecast period.The market functions as a platform for international transactions, where participants speculate on currency pairs based on various factors. Economic indicators, political developments, inflationary pressures, and risk appetite are among the primary drivers influencing investment flows in this market. Balance of payments data provides insights into the economic health of countries and their demand for foreign currency.
Further, terrorism threats and geopolitical risks can also significantly impact exchange rates. Reporting dealers, as key players, offer inter-day liquidity and use this fund to facilitate transactions at their posted bids. Monetary policy responses and international cooperation are essential to maintaining market stability and mitigating non-diversifiable risks. Despite high competition among liquidity providers, they play a crucial role in absorbing imbalances and providing returns reflecting the associated risk premium.
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The reporting dealers segment accounted for USD 262.98 billion in 2018 and showed a gradual increase during the forecast period.
Europe is estimated to contribute 43% to the growth of the global market during the forecast period. Technavio's analysts have elaborately explained the regional trends and drivers that shape the market during the forecast period.
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The market experienced a 3.6% increase in trading activity between October 2020 and October 2021 in North America. This growth can be attributed to heightened surveillance and regulation in the market, as well as the influence of various economic and political factors. Investment flows, economic indicators, and political developments all played a role in shaping trading activity during this period. Speculation surrounding inflationary pressures and geopolitical risks, such as terrorism threats and geopolitical instability, also impacted the market. Retail forex trading continued to gain popularity, with international transactions becoming more common. Monetary policy responses from central banks and international cooperation between regulatory bodies further influenced market trends.
Additionally, sell-side dealers are expected to play a significant role in the forecast period, with auditable standards in trading activities becoming increasingly important. This may enable easier communication between traders and help to prevent collusive activities and benchmark manipulations in the currency markets. Overall, the market will remain a dynamic and complex environment, with a range of factors shaping trading activity and market trends.
Our researchers analyzed the data with 2023 as the base year, along with the key drivers, trends, and challenges. A holistic analysis of drivers will help companies refine their marketing strategies to gain a competitive advantage.
Growing urbanization and digitalization is the key driver of the market. The market plays a significant role in the global economy by facilitating the exchange of currencies between financial institutions, corporations, retailers, and individuals. The foreign exchange rate is a critical determinant of international trade and investment, influenced by various factors such as interest rate differentials and monetary interventions. The foreign securities market, including currency swaps, is an essential component of the market, catering to the needs of both financial and non-financial customers. The urbanization trend, driven by economic growth and declining employment in agricultural and extractive industries, has led to a growing reliance on the market for international trade and financial transactions.
By 2030, it is projected that 41 very large cities, each with a population of over ten million people, will accommodate approximately one-sixth of the world's population. As globalization continues to transform economies and societies, the importance of the market in facilitating international transactions and enabling economic growth in urban areas will only increase.
24x7 trading opportunities for foreign exchange is the upcoming trend in the market. The market, also known as the currency market, operates continuously due to its decentralized nature and the involvement of financial institutions and non-financial customers from around the world. Transactions occur through a network of computers rather than a single physical exchange, enabling trading 24 hours a day. This is significant as different international time zones mean that trading continues even after the closure of major financial centers such as New York. The exchange rate between two currencies reflects the current market price at a given time. Currency swaps, a common foreign exchange instrument, enable the simultaneous exchange of principal and interest between two parties in different currencies.
Further, individuals, retailers, corporate institutions, and international trade participants all utilize the market to manage currency risk, facilitate international transactions, and capitalize on interest rate differentials. Monetary interventions by central banks can also impact exchange rates.
Uncertainty of future exchange rates is a key challenge affecting the market growth. The market, also known as the Forex market, plays a significant role in the global economy by facilitating the exchange of currencies between financial institutions, corporations, and non-financial customers. The value of currencies can fluctuate, introducing uncertainty into foreign trading transactions. For instance, if a buyer agrees to pay a fixed amount in one currency for goods or services, but the exchange rate changes before payment is received, the seller may experience a loss due to the depreciation or devaluation of the foreign currency. For example, if a seller agrees to accept Euros for a shipment worth USD525,935, and the exchange rate is USD0.85
Additionally, per Euro at the time of the deal, the seller expects to receive â¬612,360. However, if the Euro depreciates to USD0.84 per Euro before payment is received, the seller will only receive â¬605,278, resulting in a loss of USD7,082. Currency swaps, a popular instrument in the Forex market, can help mitigate this risk by allowing parties to exchange principal and interest in different currencies at a predetermined exchange rate. Individuals, retailers, corporate institutions, and international trade all rely on the Forex market to manage currency risk and facilitate international transactions. Interest rate differentials and monetary interventions by central banks also influence exchange rates, making the Forex market an essential component of the global financial system.
The market forecasting report includes the adoption lifecycle of the market, covering from the innovator's stage to the laggard's stage. It focuses on adoption rates in different regions based on penetration. Furthermore, the report also includes key purchase criteria and drivers of price sensitivity to help companies evaluate and develop their market growth analysis strategies.
Customer Landscape
Companies are implementing various strategies, such as strategic alliances, partnerships, mergers and acquisitions, geographical expansion, and product/service launches, to enhance their presence in the market.
Bank of America Corp. - The company offers foreign exchange services such as outbound domestic wire transfer and outbound international wire transfer services.
The market research and growth report includes detailed analyses of the competitive landscape of the market and information about key companies, including:
Qualitative and quantitative analysis of companies has been conducted to help clients understand the wider business environment as well as the strengths and weaknesses of key market players. Data is qualitatively analyzed to categorize companies as pure play, category-focused, industry-focused, and diversified; it is quantitatively analyzed to categorize companies as dominant, leading, strong, tentative, and weak.
The market, also known as Forex or FX, is a global decentralized marketplace where currencies are bought, sold, and exchanged. It is a vital component of the foreign securities market and plays a significant role in international trade and finance. Financial institutions, corporations, non-financial customers, individuals, retailers, and various other entities participate in this market. Currency swaps, interest rate differentials, monetary interventions, speculation, investment flows, balance of payments, economic indicators, political developments, risk appetite, inflationary pressures, and geopolitical risks are some of the key factors influencing the market. The market operates 24 hours a day due to the time difference between major financial centers around the world.
Moreover, modern technology and electronic platforms have increased its efficiency, making it accessible to individual investors, small businesses, multinational corporations, and major financial institutions. Major currency pairs, such as EUR/USD, USD/JPY, and GBP/USD, dominate the trading volume. Central banks, monetary policies, regulations, and inflation are essential factors that influence currency price movements. Global economic developments, trade balances, inflationary trends, and economic events also impact the market significantly. Foreign exchange services, including currency exchange, remittance services, and IoT insurance market, cater to the diverse needs of various customers. Risk management solutions, liquidity, and 24-hour operation are some of the advantages of the market. It plays a crucial role in personal finance, global commerce, international travel, and online shopping.
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Market Scope |
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Report Coverage |
Details |
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Page number |
178 |
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Base year |
2023 |
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Historic period |
2018-2022 |
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Forecast period |
2024-2028 |
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Growth momentum & CAGR |
Accelerate at a CAGR of 10.31% |
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Market Growth 2024-2028 |
USD 516.48 billion |
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Market structure |
Fragmented |
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YoY growth 2023-2024(%) |
8.82 |
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Regional analysis |
North America, Europe, APAC, South America, and Middle East and Africa |
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Performing market contribution |
Europe at 43% |
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Key countries |
US, China, Japan, UK, and Switzerland |
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Competitive landscape |
Leading Companies, Market Positioning of Companies, Competitive Strategies, and Industry Risks |
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Key companies profiled |
Bank of America Corp., Barclays PLC, BNP Paribas SA, Citigroup Inc., Commonwealth Bank of Australia, DBS Bank Ltd., Deutsche Bank AG, HSBC Holdings Plc, JPMorgan Chase and Co., London Stock Exchange Group plc, NatWest Group plc, Societe Generale SA, Standard Chartered PLC, State Street Corp., The Bank of Nova Scotia, The Goldman Sachs Group Inc., UBS Group AG, Westpac Banking Corp., and XTX Markets Ltd. |
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Market dynamics |
Parent market analysis, market growth inducers and obstacles, market forecast, fast-growing and slow-growing segment analysis, COVID-19 impact and recovery analysis and future consumer dynamics, market condition analysis for the forecast period |
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Customization purview |
If our market report has not included the data that you are looking for, you can reach out to our analysts and get segments customized. |
We can help! Our analysts can customize this market research report to meet your requirements. Get in touch
1 Executive Summary
2 Market Landscape
3 Market Sizing
4 Historic Market Size
5 Five Forces Analysis
6 Market Segmentation by Type
7 Market Segmentation by Trade Finance Instruments
8 Customer Landscape
9 Geographic Landscape
10 Drivers, Challenges, and Trends
11 Vendor Landscape
12 Vendor Analysis
13 Appendix
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