London FX volume shrinks to $2.75 trillion in October 2021

Daily foreign exchange trading volumes in London rose 7 percent in October 2021 from the year prior, to $2.75 trillion, the Bank of England said in its latest triennial report on the FX market.

This figure was, however, down by 6 percent from the record $2.98 trillion turnover reported in April 2021. The latter was the highest recorded since the survey began in 2004 and bested the previous record of $2.86 trillion in April 2019.

The decline in the average daily volume in the City was broad-based and was reported across almost all currency pairs, instrument types, counterparty types, and execution methods.

FX swaps, which are primarily used by market participants for liquidity management and hedging currency risks, suffered the largest fall. This was accompanied by a 6 percent decrease in turnover which came in at $1.42 trillion compared to$1.52 trillion in the previous survey.

One of the primary culprits of the recent fall in October 2021 was also attributed to a drop in spot turnover, which had lost nearly 9 percent since the survey of April. The segment achieved an average daily turnover of $730 billion, BOE said.

Turnover in outright forwards (+3 percent) and NDFs (-5 percent) were mixed relative to April 2021. Turnover in all instruments other than outright forwards decreased when compared to the April 2021 survey.

In terms of specific FX pairs across the FX market, the survey’s breakdown shows that major currency pairs had seen mixed performance in average daily turnover since the last survey.

EUR/USD remained the most commonly traded pair in London, with average daily turnover of $768.5 billion in October 2021. This represented a 15 percent decrease on the April 2021 survey results and a 2 percent decrease on the October 2020 figures. USD/JPY turnover also fell from $347.0 billion in April 2021, to $289.5 billion in October 2021 (-17 percent).

There was an increase in the Sterling activity reported in October 2021 relative to April 2021. GBP/USD maintained its position as the second most commonly traded currency pair in London with $429.9 billion exchanges hands, up 13 percent from April 2021’s metrics. The percentage share of all trades including sterling as a proportion of average daily turnover also rose from 16.6 percent in April 2021 to 19.7 percent in October 2021.

Other notable changes in trading across major currency pairs include AUD/USD, which increased by 3 percent since April 2021 to $125.0 billion and became the fourth most traded currency pair.

The 28 largest banks active in the UK forex market participated in the survey, which the UK central bank conducts twice per year, in spring and autumn.