GBP to EUR
Involving two of the world’s most prominently traded currencies, the GBP to EUR pairing is highly popular across the world’s financial markets. It enjoys strong liquidity plus a good volume of consistent trade, making for an exciting and active market.
This pair is the eighth most popular forex trading choice worldwide and is quoted depending on supply and demand, to four decimal places.
It’s also known as a trending pair, characterised by regular prolonged spells of rising or falling trends, with limited fluctuation in between these. Historically, this pairing has always moved within a range of 0.5673 to 0.9800.
How to play
A brief history of GBP to EUR
The UK’s currency, the pound sterling, dates back hundreds of years. It was decimalised in 1971, and today it’s the forex market’s fourth most traded currency. It represents a large proportion of worldwide trade.
The UK exiting the Exchange Rate Mechanism (ERM) in 1992, the falling of prices in 2001 as the dot.com bubble popped, and the Brexit referendum of 2016 have all affected GBP’s exchange rate over the years.
For its part, the euro, the national monetary unit for huge swathes of the European continent, is a relatively young currency. And it’s come a long way since the idea for it was first mooted in the EU, the world’s largest economic area.
It stems from the economic and monetary union among EU nations which dates back as far as the 1960s. This aims to enhance economic stability while boosting cross-border trade.
In 1999, 11 member states fixed their exchange rates and formed a new currency. At the same time, the European Central Bank took control of monetary policy.
Initially, the euro was only used for accounting purposes, and remained an ‘invisible currency’. Physical coins and notes were circulated from 2002, as previous national currencies ceased.
The Eurozone crisis
Over its history, the euro has undergone price swings while economic and political events have battered the currency.
The second decade of the euro’s existence has been dominated by the Eurozone crisis, in which Ireland, Spain, Portugal, Cyprus and Greece had to seek help. Emergency measures included introducing the European Stability Mechanism to help euro area nations needing financial help.
The need for a banking union emerged to prevent another crisis. Additionally, the seven EU member states not in the Eurozone at the time of writing will have to join it once they meet the convergence criteria.
Which countries have the Euro as their currency?
- The Netherlands
Factors affecting the USD/pound exchange rate
Economic crises and recessions can, of course, strongly influence the ever-changing prices of currencies. As with most currency pairs, GBP/Euro is highly sensitive to external factors.
One thing affecting GBP/Euro trading is interest rates. So investors and traders follow what the European Central Bank (ECB) is doing closely. They use monthly ECB reports on Europe’s future economic outlook and interest rates to assess the likely impact on GBP/Euro price.
Economic information (such as employment figures) is readily available and also plays its part.
The Bank of England’s monetary policies is another factor, including changes in interest rates to curb inflation. Again, investors and traders keep a close eye on this.
Finally, preliminary, revised and final GDP reports are key indicators of the UK’s economic health, and so again will be closely watched.
While in theory, 24-hour trading is perfectly possible, often the best time to trade is when the currency pair is more volatile. The busiest times are typically between 0600 and 1600 GMT.
Trading this currency pair
Keep in mind the exchange rate of the pound and the euro against other global currencies. If either has lost ground against the US dollar, for example, their exporting competitiveness goes up, leading to a new rising trend.
One way of trading this currency pairing is via Contracts for Difference (CFDs), a form of derivative trading allowing speculative trading. You don’t actually need to own the currency, meaning you can speculate across the short or long term on future price direction. That way, you can aim to profit from the fluctuating euro to GBP rate.
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