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What is foreign exchange investment? How to buy and sell euro currency?
2022-03-22
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How to invest in euros?
Besides the US dollar,the euro is the second largest currency in the foreign exchange market.Investing in the foreign exchange market is inseparable from the buying and selling of the euro.The next step is to understand the basic information of the euro economy and the factors that drive the economy forward,as well as the currency.Features.We first take a quick look at relevant key facts and figures,and then get an economic overview of it.
We will visit the country's central bank and learn the secrets of the central banks of various countries.Here,we'll explore the powerful monetary policy tools central banks use to control a country's economy.Here we want to teach you how to better conduct foreign exchange investment transactions.
In addition,we will discuss important features that distinguish one country's currency from other countries'currencies,as well as important economic indicators for that country.In order to make our journey interesting,we will occasionally do a little Q&A and tell you useful trading tips.
Where did the euro come from?
The European Union(EU)consists of 27 member states,which was developed from an alliance of six neighbouring countries in 1951.Bound by the Maastricht Treaty,the European Union has gradually evolved into an economic and political bloc,the largest economic region in the world,playing a huge role in international transactions and global economic affairs.
Of the EU member states,17 have chosen the euro(EUR)as their common currency.These countries form the euro area,also known as the European Monetary Union(EMU).
Members of this elite group include:Austria,Belgium,Cyprus,Estonia.Finland,France,Germany,Greece,Ireland,Italy,Luxembourg,Malta,Netherlands,Portugal,Slovakia,Slovenia and Spain.
In addition to adopting a single currency,these countries also follow the same monetary policy set by the European Central Bank(ECB).
What information does the euro area need to focus on?
EU member states:Austria,Belgium,Cyprus,Estonia.Finland,France,Germany,Greece,Ireland,Italy,Luxembourg,Malta,Netherlands,Portugal,Slovakia,Slovenia and Spain.
Area:1,669,807 square miles
Population:501,259,840
Population density:300.2 people per square mile
European Commission President:Barroso(JoseManuelBarroso)
European Parliament President:Martin Schulz
European Council President:Herman Van Rompuy
Currency:Euro(EUR)
Major Imports:Machinery,Automobiles,Aircraft,Plastics,Crude Oil,Chemicals,Textiles,Metals
Main export commodities:machinery,motor vehicles,aircraft,plastics,pharmaceuticals and other chemicals,Banderas(Antonio Banderas),Cruz(Penelope Cruz)
Import partners:China 15.98%,US 11.97%,Russia 11.22%,Norway 6.13%,Switzerland 5.14%
Export partners:US 19.07%,Russia 8.03%,Switzerland 7.49%,China 6%,Turkey 4.14%
Time zone:GMT,GMT East Zone 1,GMT East Zone 2
Website:http://www.europa.eu
What economic factors affect the euro?
1.The euro area includes more than half of the countries in the European Union.In 2011,the euro area was the world's largest economy with a GDP of 9.4 trillion euros.The euro area economy is service-oriented,with services accounting for 70%of GDP.
In addition,the euro area is the second most attractive investment market for domestic and international investors after the United States.Active participation in international trade makes the euro one of the reserve currencies important,so we often see the dollar and the The movement of the euro is always negatively correlated.
2.As an economic union,the euro area has a standard legal system,especially with regard to trade.The overall size of the euro area's economy makes it an important player in the international trading arena.
3.Because multiple countries appear as the same entity,their transactions are facilitated,especially with their first trading partner,the United States.This is because countries trading in the euro area need large reserves of currency to reduce foreign exchange transaction risk and reduce transaction costs.
What fiscal policies does the euro need to focus on?
1.The European Central Bank(ECB)is the competent authority for monetary policy in the European Union.The executive board,headed by central bank governor Mario Draghi,also includes a deputy governor and four policymakers.Together with the top central bankers of the euro zone countries,they form the ECB Governing Council,which has the right to vote on changes in monetary policy.
The main task of the ECB is to maintain price stability across the region-high demands!To achieve this goal,the countries of the euro zone signed the Maastricht Treaty,which stipulates the code of conduct for each member state.Here are some of the regulations:
2.The inflation rate of a country must not exceed the average of the inflation of the best performing(lowest)three countries by more than 1.5%.Long-term interest rates must be no more than 2%higher than those in these well-performing countries.For a certain period of time,the exchange rate must be within the exchange rate mechanism.The government deficit cannot exceed 3%of GDP.If a country fails to meet the above requirements,a significant fine will be imposed.
3.The European Central Bank regards the adjustment of benchmark interest rates and open market operations as its monetary policy tools.The ECB's benchmark rate,or refinancing rate,is the rate of return that the central bank pays the central banks of member countries.The central bank uses this rate to control inflation.
4.Open market operations are used to control interest rates,control liquidity and indicate the stance of monetary policy.These policies are achieved through government repurchases of government securities.
5.To increase liquidity,the ECB buys securities,spends euros,and then makes them circulate.On the contrary,in order to solve the excess liquidity,the European Central Bank sells securities in exchange for euros,so there is always a seesaw relationship between the euro and the stock markets of European countries.
6.In addition to using monetary policy tools,the ECB will also intervene in the foreign exchange market to reduce inflation.Therefore,traders should pay close attention to the words of the members of the management board,because they have a great influence on the euro.
How does the euro affect the foreign exchange market?
In addition to being called the anti-dollar,the euro is also nicknamed fiber.Some say the nickname stems from transatlantic fiber optics(used for communications),while others believe it stems from the paper used to print money.
Here are some features of the euro:
1.The euro has been called the"anti-dollar"
The euro is known as the anti-dollar,and EURUSD is the most widely traded currency pair.At the same time,they are also the most liquid and have the smallest trading spreads.ProFX financial transaction terminal seamlessly links international market quotations,and the cost of European and American spreads is as low as 1.4.
2.London trading hours are busy
The euro is most active when London trading hours are open,which is 14:30 Beijing time summer time(15:30 winter time),followed by the opening of the US market(20:30 Beijing time summer time,21:30 winter time)As the US dollar was successfully traded,the impact on the euro was also greater.
3.Some Relationships with the Euro
The movement of EUR/USD is related to the movement of capital markets,such as bonds and stocks.It is inversely correlated with the Dow Jones 30,which reflects changes in the U.S.stock market.
After the 2007 financial crisis,the changes between the two were not synchronized.EUR/USD is now showing a slight positive correlation with the Dow Jones 30.
The direction of EUR/USD is inversely related to that of USD/CHF,indicating that the CHF moves essentially parallel to the EUR background.
What economic data should I watch when trading the euro?
1.Gross Domestic Product:GDP mainly measures economic growth in the region.Since Germany is the largest economy in the euro area,his GDP has the greatest impact on the movement of the euro.
2.Employment changes:The euro is also very sensitive to changes in employment conditions,especially in Germany and France,the major economies in the region.
3.German Industrial Production:This data measures the total output of German manufacturing and extractive industries.Therefore,it reflects the strength or weakness of German industrial activity in the short term.
4.German IFO Business Climate Index:This is one of the country's important business surveys.Conducted monthly,the survey examines the current state of German business and expectations for future conditions.
5.Budget deficit:There is a clause in the Maastricht Treaty that states that economies in the euro zone should keep their debt-to-GDP ratio below 60%,and deficits should not exceed 3%of annual GDP.Failure to achieve these goals will lead to fiscal volatility in the euro area.
6.Consumer Price Index(CPI):Since one of the ECB's goals is to maintain price stability,they pay close attention to indicators of inflation such as CPI.If the annual CPI deviates from the central bank's target,the ECB will use monetary policy tools to control inflation.
What factors affect the exchange rate of the euro?
1.First,the fundamentals of the euro area
The euro is bullish if the economy of the euro zone as a whole is doing well,or that its member countries are doing well.For example,a better-than-expected German or French GDP report would make investors bullish on the euro.
2.Changes in the U.S.economy
Sudden changes in market sentiment,mostly influenced by US economic data,have a great impact on the EUR/USD movement.
As an"anti-dollar"currency,the euro is also affected by the diversification of global foreign exchange reserves from dollar assets.Some people suggest that the euro should be used as a new reserve currency.
3.Differences in yield
The yield spread between the US 10-year Treasury note and the German 10-year bond will reflect the direction of EUR/USD.If the spread between the two bonds widens,EUR/USD moves according to the higher-yielding currency.
Similar to bond yields,the difference between interest rates is also an important indicator of changes in EUR/USD.Investors,for example,often compare the difference between the yield on Eurozone Interbank Offered Rate futures and the yield on EURUSD futures.
Note:"Euribor"is an acronym for Eurozone Interbank Offered Rate.This rate is used by euro area banks to conduct interbank transactions.EURUSD futures are priced in U.S.dollars.
How to invest through changes in the euro?
The EUR/USD trade volume is measured or denominated in EUR.A standard lot is 100,000 euros and a mini lot is 10,000 euros.
The value of each point is denominated in US dollars,and in the exchange rate expressed in EUR/USD,four decimal places are one point.
Gains and losses are denominated in U.S.dollars.In the case of 1 standard lot,the value of each tick is$10;for the mini lot,the value of each tick is$1.
Calculations for margin trading are based on USD.For example,if the existing exchange rate for EUR/USD is 1.4000 and the leverage is 100,the minimum margin required to trade a standard lot should normally be$1400.
The EUR/USD exchange rate rises and the amount of USD margin required increases.The EUR/USD exchange rate falls and the amount of USD margin required decreases.ProFX financial trading in Europe and the United States occupies only 400 US dollars/lot,and the capital utilization rate is much ahead of the same industry.
What are the trading tips for EUR/USD?
A bullish euro usually occurs after a strong economic report from the euro zone will give the EUR/USD a long trade opportunity.A bearish euro typically follows weak economic reports from the euro zone,providing a trading basis for EUR/USD shorts.
Since the trend of EUR/USD is usually used as an indicator to measure traders'attitude towards the US dollar,referring to and understanding the trend of the US dollar will provide a richer trading strategy for EUR/USD trading.
For example,if market traders are going to buy USD due to a better-than-expected US retail sales report,you should be short EUR/USD.
Instead of waiting for EUR/USD to test or break important support or resistance levels,trading on retracements also works.
EUR/USD is very sensitive to retracements,which means that short or long trades at important Fibonacci levels can also make money.By taking advantage of retracements,investors will enter a trade at a more appropriate price than if the price would jump based on the direction of the price change.
If you're feeling adventurous,there are other euro pairs,such as EUR/JPY,EUR/CHF and EUR/GBP,to choose from.Every euro pair is unique.
For example,EUR/JPY is more volatile than EUR/USD and is more active during Asian and London trading hours.
EUR/GBP and EUR/CHF movements have been consolidating for the most part.The latter are more prone to sharp gains due to low liquidity.
The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.
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