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INVSTR TOPIC: FOREIGN EXCHANGE

by | Mar 1, 2016

Foreign Exchange (or Forex for short) is the world’s biggest financial market. invstr’s Lea Jakobiac investigates the impact on global trade, the worldwide economy and effect of a possible Brexit.

Video Transcript

LEA JAKOBIAK (Reporter, invstr): Forex is the world’s biggest financial markets.

JOE RUNDLE (Head of Trading, ETX Capital): Every company needs to trade with another country and that just means that it  generals people’s business. People need foreign exchange and that’s what creates this huge pool of liquidity that we see. As its most simplest terms it’s people buying another currency and swapping it for the currency they have.This generally happens because people want to trade and exchange goods and services and they have to pay for them and not always in the currency of their domestic.

MARK FAULKNER (Game Manager, invstr): We have two nations one with some resources and one with some industrial goods but they have a lot of cash and they want to buy the resources. they can’t simply take their money over to the other nations spend it because the money’s meaningless over there. So they have to go to any financial institution or bank in order to exchange their currency for the currency of the country in question. So ten monopoly books gets you two gold coins. That then allows them to spend their two gold coins on buying the resource that they need.

And companies of all sizes now depend on FX.

ROMAN ITSKOVICH (FX Adviser for Startups): Today almost any company even if it’s a one-man show that sells tablets on Amazon is an international company because if you deal with goods of any certain kind you will be importing something from Asia, or from Europe, or from somewhere. It’s just not cost comparative to do it. A lot of especially consumer facing things like you know anything to do with plastic, toys, electronics most of it is manufactured in China these days. Which means that you know much, much smaller businesses than 20 years ago these days have to have have to trade internationally, have to understand the financial risk, and have to have the financial tools to do that.

A hundred and eighty currencies are recognized by the UN worldwide. Over five trillion dollars worth of transactions are made every day. And eighty percent of all transactions involve the US dollar.

LEA JAKOBIAK (Reporter, invstr):  Now London is one of the biggest centers in the world when it comes to FX.

JOE RUNDLE (Head of Trading, ETX Capital): London really has the advantageous position geographically of being stuck between America and Asia. So, therefore all the currency seems to flow through London because it overlaps the trading day. So, a lot of centers of foreign exchange is in London. We’ve just seen the Chinese introduce offshore Chinese one trading into London and then traditionally the Americas banks have huge organizations here in London. Therefore, you see London as the global hub of foreign exchange.

LEA JAKOBIAK (Reporter, invstr): The FX market is heavily dependent on what happens in the world. So, for example the British pound fell sharply when Boris Johnson said that he was in favor of Britain exiting the EU.

JOE RUNDLE (Head of Trading, ETX Capital): Companies in the UK don’t know whether to invest into the sterling. So therefore they’re taking money offshore and that could be continued to be seen when we get closer to the vote and the decision is a bit more clear. I think we will then see a directional move. But in the next couple of months we’re going to see a lot of volatility and a lot of very sharp moves up and down.

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ALL RIGHTS RESERVED © INVSTR LTD. 2018

Risk Disclosure:
Invstr is a technology platform, not a registered broker-dealer or investment adviser. Invstr does not offer its own recommendations of any security or provide its own research to any user regarding any security transaction or order.
Please note, investing involves risk and investments may lose value. Past performance does not guarantee future results.
Brokerage services are provided by the following:
US-traded securities, including fractional trading, are provided to Invstr users by DriveWealth LLC, a regulated member of FINRA/SIPC. DriveWealth may not establish investment accounts to residents of certain jurisdictions. For more information, including disclaimers, risk and transaction fees click here.
India account traded securities are provided by SIC Stocks & Services PVT Ltd. SIC does not make any personal recommendations to buy, sell or otherwise deal in investments. Investors make their own investment decisions. The services and securities provided by SIC may not be suitable for all customers and, if you have any doubts, you should seek advice from an independent financial adviser. For more information and disclaimers, click here.

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ALL RIGHTS RESERVED © INVSTR LTD. 2018

Risk Disclosure:
Invstr is a technology platform, not a registered broker-dealer or investment adviser. Invstr does not offer its own recommendations of any security or provide its own research to any user regarding any security transaction or order.
Please note, investing involves risk and investments may lose value. Past performance does not guarantee future results.
Brokerage services are provided by the following:
US-traded securities, including fractional trading, are provided to Invstr users by DriveWealth LLC, a regulated member of FINRA/SIPC. DriveWealth may not establish investment accounts to residents of certain jurisdictions. For more information, including disclaimers, risk and transaction fees click here.
India account traded securities are provided by SIC Stocks & Services PVT Ltd. SIC does not make any personal recommendations to buy, sell or otherwise deal in investments. Investors make their own investment decisions. The services and securities provided by SIC may not be suitable for all customers and, if you have any doubts, you should seek advice from an independent financial adviser. For more information and disclaimers, click here.

 

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