Introduction:
EUR/USD is frequently used to denote the approximate value of USD that needs to be exchanged in order to obtain a single EUR. In the quotation EUR/USD, the EUR represents the base currency while the USD is taken as the counter currency.
EUR/USD is perhaps the world’s most widely used and oft-traded currency pair. The reason for the popularity and excessive use of the pair lies in the fact that each of the two currencies are representatives of the world’s most powerful economies; namely, Europe and the United States respectively. The wave of changes throughout the world market is almost always attributed to the fluctuations in at least one of the two currencies.
General facts and importance:The world’s largest and most successful multinational corporations have their headquarters in either Europe or America, and even both. There is little doubt in the fact that despite tremendous growth of businesses and corporations around the world, the European and American blocs still seem to overshadow the rest in terms of operation and significance. These multinational tycoons, being operational in Europe and America, are actively involved in the trade of these two currencies. With such frequent exchange and trade, all these firms have to make sure that they secure their assets and hedge the risk that is inevitably involved in the exchange rate.
The EUR/USD exchanges rarely every halt. The pair enjoys the status of being the only currency pair that is loved by the traders around the globe even when the currencies offer minimum arbitrage chances. The opportunity to benefit from a currency arbitrage when dealing in EUR/USD is also next to improbable because the exchange is so recurrent that there hardly is space for further exploitation that arise from variances in quotes.
The most attractive feature of the pair is the perfect balance of volatility and liquidity. Especially for those who are not exceptionally adept at dealing forex or are new to it will find the EUR/USD pair to be the best choice for a beginning.
Around 70 per cent and even more of the world’s transactions are carried out in terms of EUR/USD. Given that the US Dollar is the world’s most oft-traded and most popular currency followed by the Euro, it is no surprise the pair dominates all other currency duos.
Furthermore, since Europe and the US are the world’s biggest economies, the two currencies are important when it comes to investments. The prices for almost all the essential commodities, gold and oil for instance, are set in US dollars. US dollars are the most favourable option when it comes to reserving currency in international banks. Also, the EUR is unique as it serves as the currency for the entire European Union.
Factors affecting the pair:
Primarily, the interest rate governs the strength of one currency against the other in the pair. The higher the interest rate, the stronger is the standing of the currency. However, since EUR represents the entire EU, political disagreements from time to time often impart a negative impact on the EUR, making it weaker against its paired currency.
Since the pair is highly volatile, it presents the opportunities for profit in the forex market. Offering just the right amount of volatility and liquidity, this pair happens to be the most popular currency pair in the world.
Taking advantage of news trading to make money while trading:
To make the best out of your trading activities, it is essential that you stay abreast with the latest trends and changes in the market. Trading is all about strategy and right timing. Lagging behind in what’s trending and the news that help you gauge the market’s weather can be potentially damaging.
Earnings releases and economic indicators along with broadcasts on liquidity etc. can help you leave indelible marks of success in the market by shaping your strategies beforehand.
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