## The Foreign Exchange Market in 2026 May Enter a Turning Point: Can Central Bank Policy Changes Stabilize Volatility?

Last year's foreign exchange market was indeed turbulent. From the breakdown of the Mar-a-Lago agreement to the US Independence Day incident, a series of black swan events triggered a sharp decline in the US dollar, causing intense fluctuations across the global forex market. But by 2026, things might look very different.

**Central banks enter a wait-and-see period, and the market is expected to gradually stabilize**

As the Federal Reserve and the European Central Bank approach the end of their current rate-cutting cycles, the direction of the forex market is beginning to become clearer. Reduced policy uncertainty often means the market will shift from sharp volatility to relative stability, which is good news for forex traders and investors. When central bank policy frameworks are no longer adjusted frequently, forex rates tend to have more stable anchors.

**Forecasting forex volatility remains challenging**

Honestly, predicting exchange rate movements has always been one of the most challenging tasks in finance. Although the accuracy of forecasts is questionable, it hasn't stopped analysts from continuing to make various data-driven predictions—even when the underlying logic is often fraught with uncertainty. This phenomenon itself reflects that, in the absence of perfect forecasting tools, market participants are still striving to understand possible development directions.

**Six key factors will define the 2026 foreign exchange market landscape**

Looking ahead to 2026, at least six critical elements will significantly influence the performance of the global forex market. These factors encompass policy adjustments, economic data, geopolitical risks, and more, each potentially serving as a trigger to change market expectations. For participants closely monitoring the forex market, the evolution of these six factors will be an important reference for judging market direction.