Forex Weekly Look Back: A risk on scenario dominates the markets, IS Prime offers a solution to trading with negative prices

Looking back at the most intriguing and popular industry news from the past week between 27th April and 1st May on LeapRate.

A risk on scenario has dominated markets in the last few days. Central banks’ huge easing decisions and growing expectations for a relatively quick solution to coronavirus – or at least for ending the lockdown – are giving some relief to oil with the June contract of WTI recovering to $14. The modest gains have been achieved despite ETFs rolling over their contracts well in advance of the actual expiry of the front-month contract order to avoid a similar situation to what happened last week when the May expiry turned negative in its final day.

Royal Dutch Shell has slashed its dividend for the first time since the Second World War. It now stands at $0.16 down from $0.47 per share, a decrease of 67%. After announcing profits had almost halved year on year, its shares are propping up the FTSE100 index this morning as uncertainty for the oil market continues to put pressure on the sector. The UK’s second largest supermarket Sainsbury’s is down over 4% after highlighting that the surge in grocery sales it has seen will likely be offset by losses in other areas, such as fuel and clothing.

Forex Weekly Look Back

In recent months we’ve seen the US dollar index (DXY), which tracks the US dollar’s performance against a basket of six other currencies, surging to its highest levels since 2017. This last move higher occurred in tandem with the spreading of the coronavirus across the globe. However, the dollar’s upward path was already well underway even before the virus became the main talking point. Between February and July of 2018, the DXY surged by over 8%. Since January of this year, it has pushed higher by a further 3%, with it being up almost 6% at its highs in late March. But what is causing this strength and what does it mean for the global economy?

Recent unprecedented volatility in the oil markets has created a risk dynamic which, if not addressed, could be catastrophic for brokers – negative pricing. Heading into the expiration of the May 2020 WTI future contract, prices fell deep into negative territory due to a combination of lack of demand and lack of storage capacity. Following the move, Interactive Brokers announced it had suffered a provisional loss of $88 million due to client losses exceeding the equity in their accounts. They were clearly not the only firm affected.

IS Prime presented a new solution in response to the huge risk of spot oil prices falling to negative values again. The overwhelming effects coronavirus-induced lockdown on economies and war on oil during the last few weeks triggered dramatic fall in the price of oil as oil prices plunged to $40 bellow zero for a first time in history. The Prime of Prime and Liquidity Provider developed new UK & US Oil Index aiming to oppose the inability of brokers’ trading systems to accept negative rates. The new Indices are rebased at $100, meaning that in case of IS Prime’s proprietary spot price fall into negative value, e.g. $-5, the pricing will reflect this at $95, effectively preventing stop outs while reflecting the market moves the full underlying volatility of Oil.

FXCM Group, online FX, CFD trading and cryptocurrencies provider, launched commission-free single-stock CFD trading, allowing retail clients to trade CFDs on individual company shares like Tesla, Apple, Facebook and others. The company will be gradually releasing the new single stock CFDs to its entire client base over the coming weeks. The expansion into share CFDs’ initial focus will be on stocks listed in the United States. FXCM’s aim is to expand the number of individual stocks tradeable via CFDs to more than 100 and to cover at least five countries before the end of the year.

The Royal Forex donated nearly 50,000 euros to AC Milan’s foundation to fight the Covid-19. Royal Forex will sponsor the Italian football club through its ROinvesting online trading brand until 30 June 2021. The brand’s clients will be able to share their passion for sports and financial markets through a personalized experience. During the season, AC Milan and ROinvesting will launch a series of digital campaigns around the world allowing clients and fans to experience football in “rossonero” style.

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