Foreign exchange turnover in the UK rose by 10 per cent in the year to April as traders focused on political turmoil around the world, according to new data from the Bank of England.
Average daily turnover in UK forex markets, dominated by the City of London, reached $2.44 trillion (£1.87 trillion), according to a semiannual survey of major trading institutions carried out by the Bank.
This represents the highest average turnover since the $2.71 trillion daily average recorded in October 2014.
During the period covered by the survey the UK voted for Brexit, Donald Trump was elected as US President, and multiple European elections gave investors jitters.
Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi UFJ, said: "It has been a period characterised by high event risk, during which time the foreign exchange market has had to focus more intensely on shifts in public opinion."
The dollar remained the most traded currency, with it involved in 87.9 per cent of London-based transactions. The dollar against the euro remained the dominant currency pair traded in London, with 28.5 per cent of the total London trading.
“The dollar trend was led in part by Trump's victory” as investors piled into "momentum" trades, said Alvin Tan, forex strategist at Societe Generale."
Read more: The rise and fall of Trump's dollar
The dollar rose to 13-year highs against a trade-weighted basket of other currencies in the months after Trump’s election as investors piled behind the so-called Trumpflation trade, anticipating higher inflation and a big spending boost.
That helped the US dollar/euro trade increase its dominance in London trading: the dollar/euro pair grew from 28 per cent to 28.5 per cent of all trades, with £696bn traded every day.
Dollar/yen was the second most traded pair, while the percentage of all trades taken up by cable, the US dollar against the pound, fell during the last six months, from 12.9 per cent in October 2016 to 12.1 per cent in April, the survey found.
The gradual unwinding of that trade has caused yet more currency volumes, as the dollar has retreated to hit 10-month lows amid disappointment on the White House’s distinct lack of major policy achievements.
Global currency trading averaged $5.1 trillion per day in April 2016, according to triennial data from the Bank for International Settlements, with the UK holding a 37 per cent market share (although the data is not directly comparable).