Top Forex Trends For 2023

In 2022, the forex market was valued at $753.2 billion. As 2023 began, the forex market witnessed a steady start as well. It is predicted that several currencies, like the USD, are going to gain strength and momentum in 2023. 

In our article, we will cover the top forex trends for the year 2023. 

FED pivot 

The FED has started to hike its interest rate, with the US inflation topping previous records. Even though the US economy has started to do better, the Fed has not decreased its interest rates. As of December 2022, the interest rates are around 4.50%. If the US economy slips into a greater recession, the Fed will be in a tough spot which would lead to the USD depreciating in the forex market. 

It is expected that if inflation falls in 2023, there is a possibility that the Fed will stop increasing interest rates like it has been doing in the past few months. This would be the Fed pivot which could, in turn, strengthen the USD. However, this is only going to be possible if the current inflation rate of 7.1% falls below the target rate of 2%, which is a bleak possibility.  

The Euro rise

Inflation has been high in Europe, especially after the Ukraine-Russia crisis. This depreciated the EUR in the forex market to some extent. However, the European Central Bank has increased interest rates to foster more growth in the European economy. 

The Euro has successfully bounced back from the turmoil and is expected to grow in 2023. Currently trading at an exchange rate of 1.06, it is predicted that the currency may increase to up to $1.13 in 2023. However, the bullish phase will come after a temporary bearish phase, providing forex traders with the opportunity to go both long and short this year. 

Japanese inflation 

The end of 2022 marked an inflationary shift in the Japanese economy and touched 40-year highs. The Japanese Yen touched 32-year lows and traded near its support price level for a long time. In 2023, Yen is all set for a bullish turnaround where there will be a decreasing gap between the long-term bond yields between the US and Japan. 

The stronger Yen will also be followed by the Japanese economy exiting from its ultra-loose monetary policy and entering an ultra-easy monetary policy under the new Japanese governor. The expected appreciation in Yen’s price against USD in 2203 is said to surpass 110. 

Steady rise in AUD/USD

AUD/USD is going to be considered one of the most preferred currency pairs for traders in the commodities market. This is due to the strengthening of the Australian markets in 2022, which is going to continue in the near year as well. 

This currency pair is expected to have a very tight spread throughout 2023, with the current trading rate of around 0.68. rising demand in Australian imports for metals like copper, iron ore and even coal has made AUD/USD a sought-after currency pair.

Strengthening correlation between NZD/USD and AUD/USD

2023 is going to witness a stronger correlation between NZD/USD and AUD/USD compared to the previous years. NZD/USD trading volumes are said to multiply and enter a bullish phase from the current trading rate of 0.67. 

With a low inflation rate compared to other economies, New Zealand has predicted an inflation rate of 4% in 2023, strengthening the currency in the forex market. Since NZD/USD has been in a downtrend for the last year, there is a strong bullish reversal expectation as 2023 begins. 

Low spreads for EUR/USD

EUR/USD has a predicted low spread for 2023 due to its high demand, liquidity and rational volatility. Since it is one of the highest-traded currency pairs and is listed with all the topmost forex brokerages, 2023 is going to be a golden year for the pair. 

USD broke parity with EUR in 2022 for the first time in nearly 20 years, continuing its uptrend in the market. The uptrend is expected to continue with a continually rising exchange rate of 0.96. it is going to attract an extremely tight forex spread in 2023, which can be as low as 0.6 pips. Hence, trading this pair in 2023 will cost traders much lesser than before and compared to other pairs, it is going to be a profitable asset. 

Increasing trade for GBP/USD

Like EUR//USD, GBP/USD is also one of the highest-traded pairs in 2022, and the market trend for the pair is going to continue in 2023. Morgan Stanley has shared a strong prediction for the pound Sterling to be one of the strongest currencies in 2023, and traders have been more interested in going long on GBP/USD for the same reason. 

2022 was not as bullish for GBP/USD as it could have been, but a possible reversal towards a stronger currency appreciation is expected. Currently trading at 1.19, the currency pair is set to surpass its 37-year low in 2022 and move beyond 1.23. 

Automation of FX swaps

The last 2023 trend is going to be in the FX swaps zone, wherein technology is going to play a key role. FX swaps have continued to grow over the last few years, and 2023 is a key year to strengthen automation. This is going to increase volume growth and electronification of the swaps, where banks are going to price the FX swaps more accurately, even in the volatile interest rate phase.

More and more data is going to be monitored and analysed in 2023 for a better trading and execution process. It is expected that more robust systems will be developed to create more accessible and powerful cloud-based FX applications supporting FX swaps. 

Make 2023 your year of FX!

The year 2023 looks verdant for the forex market, with several currency pairs entering a bullish phase. The currency pairs that have been in a bull market the last year are expected to make a bullish reversal before the first half of 2023. Start trading with our forex platform for more market insights and a better trading experience!