Currencies & Forex Pairs to Watch in 2021

Currencies & Forex Pairs to Watch in 2021

  • Posted on 2020-0101-2021
  • by Gareth McCauley

2020 has been unpredictable, to say the least. Everything from the pandemic, remote working conditions, and the closing down of businesses to the political shifts and protests have had their effect on the global economy for better or worse. Naturally, this also impacted the forex market.

So, when it comes to 2021, there are a lot of questions going around about how the markets will fare. One of the most prevalent of these questions is how certain currencies will perform. In particular, people are wondering which currency pairs to look out for in 2021.

Whether you’re a day trader or a long-term investor, here are the currency pairs that you should monitor in the coming year. And if you have more questions about currency pairs or anything else forex, feel free to reach out to our team at Fair Forex.


The US Dollar

According to data by Statista, in 2019, the USD was part of 88 percent of all the global transactions in the foreign exchange market. This trend is unlikely to change in the coming year. The USD has been playing an important role in the forex market even after the US completely severed the link between gold and the dollar in 1971 according to Mental Floss.

The influence of USD and the US economy on the global market is unquestionable. Many countries still keep reserves of US dollars for emergency use.

Even currency pairs that don’t directly involve the US dollar can feel the shifts every time something happens in the US economy. And although 2020 has been a bit rough on the country, events to come might have stabilizing impacts on the market.

Despite USD alone not being a currency pair itself, it’s important to watch out for changes in the US economy because of its far-reaching effects on the forex market as a whole.


The British Pound and the EU’s Euro

The Euro represents the third largest economy in the world in terms of purchasing power parity or PPP. This means that anything that shakes it up is also bound to make waves elsewhere. Since the Brexit proceedings formally began in the UK in 2017, the relationship between the European Union and the UK has had some turbulence. Because of this, it would be wise to watch out for this currency pair in the coming year.


The EU has also been hit particularly hard by the COVID-19 pandemic. The huge economies of Spain, Italy, and France especially felt the spread of the virus. And although some signs point to things getting better, the real effect of the pandemic on the EU economy is still likely to be felt in 2021.


The Australian Dollar and the Canadian Dollar

These two economies are known exporters of natural resources. However, the Canada is a lot more affected by the events in the US compared to Australia. This is because three-quarters of the exports from Canada go to the United States and about half of their imports come from the US, too.

Australia, on the other hand, is in a similar situation with China. Around 30 percent of Australian exports head to China. So, events in the Chinese economy also impact the Australian dollar.

These exporters depend on the larger economies they trade with. Further development in world trade in 2021 will have significant impacts on the Canadian and Australian currencies – you should keep an eye on them.


The Chinese Yuan and the Japanese Yen

According to CNBC, 2021 looks like a promising year for the Chinese Yuan. In their interview with an expert from the Deutsche Bank, there are strong inflows into the Chinese equity and bond markets. This also follows the weak showing of the US dollar in recent times.


The minor currency of the Japanese Yen is set to feel the changes in the Yuan because they are the primary rivals when it comes to manufacturing.

The Hong Kong dollar is also something to watch out for in 2021. It has long been a favorite of traders despite not being considered a minor currency.


Additional Notes

Here are a few additional pieces of information you should look out for concerning currency pairs.

  • Interest Rates – The interest rates set by Central Banks of each country affects the performance of their currency in the world market.
  • Economic Data – Currencies are heavily impacted by the local economies of countries.
  • Current Events – Elections, scandals, natural disasters all have their effects on the currency of countries and their participation in the market.

Want to know how to read currency pairs? For more information about this topic or others related to the foreign exchange market, don’t hesitate to visit our other blog posts or contact us at 1-844-600-FAIR.