Fx Traders Blame 'insane' Technological Advances for Quiet Markets

Advances in electronic trading may be reshaping the foreign-exchange world, with some industry insiders suggesting that the days of prolonged wild swings could be over.

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That was a key theme at this week’s TradeTech FX conference in Barcelona, where automation and algorithm-driven strategies dominated the discussion. Several participants noted that the shrinking bursts of action could make it harder for market makers to profit, raising concerns that some may eventually pull out.

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This comes as daily volatility in the $7.5 trillion global FX market has slipped to near one-year lows. Even April’s tariff-driven shock in the U.S. looks more like an exception in what has been a steady trend toward calmer price action. For traders who thrive on swings, this has reduced opportunities, but for asset managers and corporations looking to hedge exposures, the stability is welcome.

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“The ability of volatility to collapse has gone up exponentially,” said Gordon Noonan, head of FX trading at Schroders. He pointed to the near-instant recovery after U.S. non-farm payrolls data as evidence of how “insane” electronic trading has become. “In the past, spreads would blow out for ages. Now they’re back in line within 30 seconds.”

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This shift has left currencies behaving oddly compared to other asset classes. While stocks and bonds continue to experience sharp swings tied to economic data and geopolitical risks, FX markets have remained relatively subdued.

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Multiple indicators confirm the trend. The euro’s intraday movements are less than half their long-term average, while Treasury yields are fluctuating in line with history. Bloomberg’s Market Impact Monitor also shows that foreign exchange has become less reactive to economic releases compared with Treasuries.

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Occasional spikes still appear such as April’s tariff turbulence or the volatility around central bank decisions but the market tends to settle quickly. According to XTX Markets, that resilience reflects the new dominance of systematic players.

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“The rise of pod shops and an army of competing algorithmic strategies has changed the game,” said Jeremy Smart, head of distribution at XTX. “It’s possible that nonbank firms will start to see FX returns as less attractive compared with other asset classes.”

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The subdued backdrop has turned shorting volatility into a popular strategy. In the past, asset managers might have used such conditions to load up on inexpensive hedges, waiting for the next flash crash. But with sharp disruptions becoming rarer, many see little need.

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“Not long ago, we’d get a flash crash every so often. That just hasn’t been happening,” said Schroders’ Noonan. “FX has become so efficient at pricing risk that you might argue we don’t even need dedicated currency traders anymore.”

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Some at the Barcelona gathering admitted they find the muted swings puzzling, given today’s uncertain global backdrop. Explanations ranged from the unemotional nature of machine-driven trading to fewer investors making bold directional bets.

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Others argued the calm makes sense in light of monetary policy. With interest rates in major economies moving lower in tandem and the Federal Reserve rejoining the global easing trend with its latest cut currency markets have less divergence to trade on.

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“As central banks align, it naturally suppresses FX volatility,” said John Rothstein, COO at Optiver. “It’s expected, even if it feels unusual compared with what we’re seeing in other markets.”

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A broader worry voiced at the conference is that widespread adoption of similar trading technologies could make the market overly uniform. If algorithms converge on identical models and strategies, liquidity could become concentrated, raising systemic risks.

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Despite the concerns, investment in automation remains a top priority. A recent survey from the London Stock Exchange Group found that most currency firms plan to boost spending on technology rather than hiring more human traders, as they seek an edge in an increasingly competitive market.

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“That’s the trajectory we’ve been on for two decades,” said Torsten Schoeneborn, co-head of G-10 FX trading at Barclays. “Trading used to be almost entirely manual. Now, in many cases, a machine executes the trades, and the human’s role is to read the signals and fine-tune the process.”

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The foreign-exchange market is evolving rapidly as algorithms and electronic platforms reshape how trades are executed. Volatility once the lifeblood of FX traders is becoming scarcer, forcing firms to rethink strategies and lean further into technology. While that may frustrate traditional traders, for companies and investors seeking stability, the new era of calmer currency markets could be just what they need.

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