FX.co ★ Donald Trump boosts currency options trading

Remarkably, currency options trading picked up steam in light of Donald Trump's victory. Bloomberg reported that trading in currency options reached record levels following the election of the Republican nominee in the US presidential race.

Market participants rushed to place bets on the US dollar’s strength. Such forecasts have come true! The greenback is likely to strengthen against most currencies this month, ahead of trade tensions and the announcement of measures to support the US economy, Nordine Naam, a currency analyst at Natixis, predicts.

According to estimates from the Depository Trust & Clearing Corporation (DTCC), contracts worth over $160 billion were traded on November 6. This marked the highest daily volume on record since tracking began in 2013.

DTCC data showed that trading in euro options was four times higher than the average. Besides, the EBS platform reported a record trading volume for the Chinese yuan. Traders in Europe reckon that such robust activity in the OTC market was driven by new positions and bets on a stronger US dollar.

The greenback surged on November 6 after Donald Trump was declared the 47th US president. Preliminary forecasts suggest that his policies of tax cuts and sharp tariff hikes could drive up inflation. As a result, the Federal Reserve will be forced to maintain the funds rate at elevated levels longer than anticipated.

Representatives from CME Group also reported a sharp increase in forex market trading volumes. On November 6, $275 billion in trades were conducted on their currency products, more than double the exchange's average daily volume recorded in October 2024. The company also noted especially intense activity in several currency pairs, including the Mexican peso and the euro.

The euro emerged as one of the market’s biggest losers. Experts warn that the trade tariffs the White House plans to impose will derail economic growth in the eurozone. In such a scenario, the ECB may need to cut interest rates more aggressively than the Federal Reserve.