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Traders see inflation as 2022’s biggest market mover

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© Reuters. Image of U.S. dollars, Swiss Francs, British Pounds and Euro banknotes, taken in Warsaw on January 26, 2011. REUTERS/Kacper Pempel

By Lucy Raitano

LONDON (Reuters] – The biggest effect on the world’s markets will be inflation in 2022. Traders believe liquidity will remain the greatest challenge every day for the sixth year. This is according to a JPMorgan annual survey, published Wednesday by the NYSE:.

Around 48% (of 718 institutional trading customers) surveyed at November 2021 said that inflation was this year’s largest market mover. This replaces the global pandemic last year.

The market expects that interest rates will rise soon, but this trend has been reversing in recent weeks. Major countries are struggling with high inflation readings and have recently seen their stock prices drop.

Next, economic disruption and the pandemic were viewed as having the most impact at 13% each.

“The concern is that more volatility and market activity will result from this increased focus,” Scott Wacker of FICC ecommerce sales at J.P. Morgan said. “This will reinforce the importance liquidity and consistent pricing, which will play into electronic trading’s hands.”

The survey revealed that electronic trading has seen a rise in the last few years. This upward trend is expected to continue over the next two-years, according to traders of all asset classes.

“We’ve had two years of pretty unusual circumstances with the pandemic – a lot of clients moved away from the office and to the home environments during a very volatile market environment, it was the perfect storm for increasing electronic trading,” JP Morgan’s Wacker said.

29% of traders selected mobile trading apps to be the key influence that would shape the markets for the coming year.

JP Morgan’s Wacker noted that artificial intelligence (and machine learning) are likely to surpass mobile tech as the most influential factors. This is partly due to many traders expecting to have mobile tech installed by then.

Nearly 50% of respondents said that artificial and machine-learning will have the greatest influence on the future trading. Blockchain received 24%.

The survey found that currency markets have a higher proportion of trading using e-channels than their fixed income counterparts. This was 69%. This is expected to rise to 85% in 2023 according to FX traders.

The rate and credit trader expect an increase of 17% in the percentage of trading that is done via e-trading channels.

Wacker said, “Credit, a new frontier market, a lot a technology that is emerging in credit,” and that JP Morgan has been trading corporate bonds across all three regions using algos.

Algo trading, also known as algorithmic trading, is the use of fast-paced computing software for trading markets. In volatile markets, they have been a valuable tool.

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