What happens when the City is off?
Today is a day off in the UK. It´s not a national holiday, it´s just a day off. Someone decided a while back that it would be best to make the last weekend of summer a bank holiday weekend or a long weekend as our north American friends refer to it. It´s only three days long including the weekend, unlike normal bank holiday weekends which are four days long, but at least the forex traders who haven´t had a chance to go on holidays during summer can pop in Spain for the weekend and get sunburnt before summer is over.
This means that the City if off as well. For those of you who don´t know, the City is an old neighbourhood in the centre of London, dating from the Roman times, where most of the hedge funds, banks and other financial institutions are located. That´s the lion´s den of the financial world. That´s the financial centre of Europe and the financial centre of the world for the insurance industry and particularly forex.
Most of the biggest insurance and reinsurance companies are headquartered there, with Lloyds of London standing out of the bunch. If you didn´t know, Lloyds used to provide insurance for the slave ships that travelled from East Africa to the Americas in the 15th and 16th centuries.
Nearly half of the forex transactions take place there, so we can say that about $2.5 trillion are traded there every day. So what happens when the City is off? Well, not much actually. Since most of the liquidity and action in the forex market is provided by the City, it gets pretty quiet when the forex traders based in the City are off. As we have seen today the price action is very slow and staring at the forex charts feels like watching paint dry.
That´s the power of the City in London, which many fear Britain will sooner or later lose after Brexit. So, it does get quiet when the City is off, but the reduced volatility is a timing bomb which might explode at any time. So you better take care and keep your stop losses tight just in case. We´re being cautious too and have opened only one forex signal so far today.
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