Although Justin Foley, managing director, head of FX at Gelber Group, concedes that subdued volatility has made FX less interesting for traders in recent years, he says that this state of affairs will not last forever.
Foley, who was inducted into the Profit & Loss Hall of Fame earlier this year, explains in a new video interview that there has been a distinct shift in mentality at his firm due to this lack of FX volatility. Gelber has increasingly “tilted” some of its traders away from looking purely at FX markets and towards other markets that might be moving more actively.
“Don’t display and equity risk-off trade hoping it comes into dollar/yen or euro/yen, go trade the equity futures on it. Don’t have an energy trade only be displayed in dollar/cad, do it in the underlying instrument that’s the first one to move and not a derivative of the move,” says Foley.
Despite this, he also claims that it is only a matter of time before FX markets become more attractive to traders again.
“Think about a few years ago, you had the Greece situation dominating financial markets, you had Brexit dominating all financial markets and at those times FX was the asset class that was in play and in seems like in the past two years or so it’s taken a little bit of a back seat to equities and then we’ve had this significant move lower in global rates, so it’s taken a backseat to global rates markets as well,” says Foley.
However, he then concludes: “We’ve all been in this business long enough to know that the cycles do reverse and [FX] will come to the forefront again.”
Click below to watch the full interview, in which Foley reflects on the changes that he has witnessed in the FX market since he began his career, and how this industry will continue to develop going forward.