FX Traders Are Thriving Amidst Global Instability

While the introduction of far-reaching tariffs by the world’s largest economy are wreaking havoc in economies across the globe, foreign exchange (FX) trading divisions in investment banks stand out as an area that is seeing greater profits amidst the chaos.

This can be explained by the large price movements in currencies which is creating greater trading opportunities. Consequently, February 2025 was CME Group’s best month on record for currency futures and options trading, with FX trading on course for $19.9bn in revenue this year. This would make this year the second-best since 2011, when low interest rates settled in and reduced the pre-financial crisis volatility that boosted profits for currency desks.

Currency volatility creates issues for international enterprise, as exporters face lower profits if the purchaser’s currency depreciates and vice versa. For this reason, some businesses with fixed international payments purchase forward or futures contracts to lock in a certain price, such as an aviation company buying jet fuel abroad. Moreover, by devaluing one’s own currency, export-oriented economies such as China can artificially boost their competitiveness abroad.

Therefore, studies have shown that, unsurprisingly, countries most at risk of adverse consequences by geopolitical instability are small open economies, emerging markets, and commodity-exporting economies, while FX markets are comparatively unaffected in advanced economies.

For as long as the USD remains the global currency, such fluctuations are beneficial to currency traders. This is unlikely to change soon, as despite the efforts of China’s leaders, the yuan is a long way off presenting a real challenge. Due to the nation’s somewhat impenetrable capital account, preventing the free flow of investment, the yuan only accounts for 3% of international trades via SWIFT (80% of which occurring in Hong Kong), despite China accounting for 17% of global GDP.

In the meantime, this quirk of the financial markets offers a ‘mini hedge’ for the economic hegemon against its own uncertainty.