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Euro Exchange Rates

The Euro: The number one currency pair traded online is the Euro dollar.currency trading online forex with anna Let's take the Euro first, and  then we will consider the other five currency pairs in turn, and consider either the base or secondary  currency in each case. In this pair the Euro is the base currency.

Euro Exchange Rates : The Euro Currency

Prior to the introduction of the Euro in 2002 as a physical currency ( having been a purely accounting one prior to this date) it was difficult for countries to keep large reserves of each others national currency. In effect this meant that the currency of first reserve was generally the US dollar. With the introduction of the Euro, most EU member states, and many others have since adopted the Euro as their currency of first reserve. This trend is expected to continue with the decline of the US dollar's importance. This is why the EUR/USD pair is the most widely traded pair in Forex. It is the most liquid of all currency pairs, and provides an indicator for strength and weakness in both Europe and the US.

Euro Exchange Rates : European Economy

The European economy is second in size only to the US, and represents 22% of the worlds total gross product with a working population third largest in the world. The European Central Bank was established as the central bank for the currency and tasked with the responsibility for maintaining liquidity, purchasing power, overall stability, and for setting Eurozone interest rates. The ECB board meets on a twice monthly basis, to discuss monetary policy and to set rates accordingly. The recent strength in the Euro has not been as a result of economic strength in Europe, but more to do with economic weakness in the USA.

Euro Exchange Rates : Factors Affecting The Euro

Being the currency used most widely throughout Europe, it is particularly sensitive to economic or political uncertainty within Europe. This is particularly true in the larger member states such as France, Germany, Italy, and to a lesser extent Spain.

Euro Exchange Rates : Major EU Economic Indicators
Interest rates - Naturally these can cause major moves in currency. Often considered a blunt instrument, their effect in the market may last only a few hours or days. For long term traders they are an annoyance - for short term traders they represent volatility in the markets and a trading opportunity. One change in interest rates rarely happens in isolation without hints of others to follow.
GDP - GDP is a classic lagging indicator and foremost in reporting on the health of the economy as it measures how fast or slow the economy is growing. As a forex trader you need to monitor this figure closely for signs of slow down or growth. In simple terms GDP is the total sum of goods and services made in the period. The market is very sensitive to these figures, but it is the longer term trend that is important. Compare trends in GDP over the last years for a comparative and meaningful analysis. May cause short term volatility, but it is the long term trend that is important. The EU economy is very dependant on the service industry with almost 75% derived from this sector alone. The figures are released quarterly.
CPI - Consumer Price Index, another of the red hot indicators that is dissected by the currency and broader markets. It's obvious why it gets so much attention as inflation touches everyone. In a nutshell it dictates how much we all have to pay for goods and services. Inflation in Europe means the purchasing power of the Euro is reduced. If the CPI is high then inflation may be rising which in turn puts pressure on the ECB to raise interest rates. At present the ECB looks to keep the CPI headline rate between 0 and 2%.
Money Supply - A set of broad measures M0 to M4 which measure the amount of cash in the system available for the purchase of goods and services. Again this gives an indication of the broader economy and is a long term indicator.

If you would like a more detailed look at the Euro and it's relationship to the US dollar, ( and the UK pound)  I have recently published several  new sites which examines the euro in more detail. Please just follow the link to euro vs dollar, euros to pounds, or euro to dollar. The sites examine the currencies from a variety of aspects including technical, fundamental, trading and investing.

And you thought forex trading online was simple !!!! - if you want to make money you have to combine the technical skills of chart reading with the fundamental analysis of both macro and micro economics. OK, having looked at the factors affecting the euro exchange rates, let's have a look at the dollar yen currency pair.

 

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