The single European currency, which from the very first day of its existence accepted a relay race of the German mark, has established itself as a fairly strong alternative to the American dollar. On a scale of popularity, euro is in second place, followed by the same U.S. dollar. The same applies to currency pairs associated with the euro.
Forex traders, who work with currency pairs involving the European single currency, need to know what factors and events may influence the course of this "European". Otherwise, it’s quite difficult to predict the future movement of these currency pairs and, as a result, virtually impossible to plan Forex trading using the euro.
The main factor influencing the rate of the euro is the U.S. dollar. "European" always responds to growth in demand or supply to the U.S. dollar, which in turn is connected with the U.S. economic indicators. For example, if the U.S. manufacturing sector produces good statistics, then there is demand for the dollar, and vice versa: the declining performance increases activity in the single European currency purchases.
This can be explained by the fact that large investors and corporations move their assets from one currency to another. This factor is always taken into account in Forex trading.
Do not forget that the euro is a currency, which use in many countries and therefore impact on the EUR can have any of the countries using this currency as the primary means of payment. Therefore, when trading Forex pairs involving the euro, traders need to watch the macroeconomic developments and fundamental statistics in these countries.
It should be noted that since the financial crisis began, statements by European leaders and the European Central Bank (ECB) began to have a highly important impact. During these statements you can observe a fairly high level of volatility on Forex.
Such situations provide an opportunity for traders to earn good money or, on the contrary, suffer losses. Thus, for the market players who prefer a more stable trading environment, it is recommended to refrain from transactions in such periods.
Very big importance for the European single currency also have macroeconomic indicators listed below:
Consumer price index in the euro zone (inflation rate);
Unemployment and all that relates to employment rates;
Economic status of the participating countries of the European Union;
Stability of the banking sector;
Release of the interest rate;
The balance of trade.
At the direction of Forex trading may also have a significant impact the statements and forecasts of major investment funds and banks. Even unsubstantiated, they influence through the human factor.
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