The world's leading macroeconomic operators and investment banks are going through one of their worst years since the pandemic.
2024 has been marked by tight margins, a challenging macroeconomic environment and limited volatility that has undermined opportunities for large financial bets.
According to data from Coalition Greenwich, revenues from interest rate and currency trading will see significant declines compared to previous years.
Macroeconomic trade revenues hit
More than 250 financial institutions, including Goldman Sachs, JPMorgan Chase, Citigroup and Morgan Stanley, are estimated to generate $32 billion in Group of 10 rate trading together.
On the other hand, foreign exchange trading revenues will reach $16.7 billion. These figures represent declines of 17% and 9% respectively compared to 2023. Below we see this summary in the following chart:
Economic uncertainty has been key to this decline. Surprises in economic data have challenged expectations of rate cuts by major central banks. Also, the approaching US presidential election and the dismantling of popular strategies such as yen-funded trading have added further pressure on markets.
A forced pause for hedge funds
Hedge fund activity has declined significantly.
According to Angad Chhatwal, head of global macro markets at Coalition Greenwich, these players have preferred to take a more cautious approach. “2024 has been a year of waiting. Funds have intervened at specific times, but their ongoing activity has been much lower than in previous years,” he said.
This caution reflects a shift in market behaviour. Traders have taken a wait-and-see approach in the absence of clear signals on the direction of the global economy. Tighter margins and increased competition have also limited opportunities to generate consistent profits.
Technology and competition reshape the market
Increased competition, driven by the expansion of non-bank market makers, has further eroded revenues in interest rate trading. In addition, the growing adoption of electronic platforms has reduced transaction costs but has also put pressure on prices in this segment.
Coalition Greenwich anticipates that revenue from rate operations will continue to decline in the coming years. A decline is projected to $30.9 billion in 2025 and $28.1 billion in 2026.
This scenario reflects a transition towards more electronic markets, where operational efficiency displaces traditional intermediation operations.
We still have a future: Currencies, resurgence on the horizon
In contrast, projections for currency trading are more optimistic.
Revenues could rise to $17.2 billion in 2025 and $17.6 billion in 2026. This growth will be driven by the volatility that the Donald Trump administration could generate, in addition to an increase in corporate activity linked to rate change cycles.
“We are seeing increased positioning in the FX market around the rate cycle,” Chhatwal said. Corporate demand, combined with an increased need to manage currency risks, is injecting momentum into the FX market against interest rates.
In summary: mixed expectations in a changing environment
Although the overall outlook for macroeconomic operators remains challenging, certain market segments are showing signs of recovery. The evolution of e-commerce and the entry of new competitors are redefining the rules of the game.
Meanwhile, traders will need to adapt to a context where caution and agility will be key to navigating economic and political volatility.
This year has marked a turning point for macroeconomic markets, forcing major players to rethink their strategies. While some challenges will persist, opportunities in currency trading suggest a revival in specific sectors of the global financial market.