Forex Trading in History
Before venturing into the detailed explanation, let us begin by saying that the Forex market has witnessed major developments. Hence, here are the chief historical events that affected it.
Bretton Woods Conference
Held in 1944 to regulate the international monetary and financial system after the end of World War II, the conference was aiming to improve the deteriorating economic situation that resulted from the war.
Subsequently, the several countries agreed to fix the exchange rate of the US Dollar against Gold to an equivalent of $35 per ounce. Furthermore, the countries unanimously agreed to fix their exchange rate against the Dollar.
The Failure of the Bretton Woods System
The agreement, whose goals were designed to minimize obstacles standing in the way of international transactions, collapsed in 1971 due to the sharp price fluctuations of the US Dollar during the Vietnam War.
Subsequently, U.S. President, Richard Dixon decided to eliminate the fixed exchange rate of the dollar against gold and other currencies. However, Nixon allowed central banks to step in if there was a need; especially in case of severe price fluctuations. From that moment on, the Forex market started evolving and grew in size and liquidity.
The Emergence of Retail Brokers
The year 1999 in the era of the internet saw radical technological developments; which allowed retail brokers to break down the entry barriers to the Foreign exchange market. This rapid changed led to the emergence of several firms, who started putting their money in the foreign exchange market. Moreover, independent speculators started to trade foreign exchange as now it was possible to trade without a large amount of capital and spreads started to narrow.