Euro Currency Profile (Part III)
ECB publishes monthly bulletin detailing analysis of economic conditions. This bulletin can give important signals to changes in the monetary policy. Forex market participants widely watch the comments by the members of the Governing Council of ECB. These comments frequently tend to move the Euro.
Now EUR/USD cross is the most liquid currency. All major euro crosses are highly liquid. The movements of EUR/USD currency pair are used as the primary gauge to judge the health of both European and the United States health. Euro is also known as the anti-dollar since it is the dollar fundamentals that have dictated the movements in the EUR/USD pair from 2003-2008.
EUR/JPY and EUR/CHF are very liquid pairs too and are used to judge the health of the Japanese and Swiss economies. EUR/USD and EUR/GBP are great trading currencies as they have tight spreads, make orderly moves and rarely gap.
Euro is still a new currency. It was launched in 1999. Euro has unique risks. There are number of risks unique to the Euro. The most important is the exposure to the economic, political and social development of 15 member countries in the EU.
Although more countries are expected to join EMU, however, if a member country drops Euro and reverts back to its original national currency because it believes that ECB actions are not in its best interests, it could affect the stability of the entire region.
ECB has the power to determine monetary policy for its 15 member countries. With that comes the political pressure of 15 governments. Making monetary policy is a challenging task to do for one country what to talk of a group of 15 countries. This political pressure frequently tests the actions of ECB. We can say Euro is a currency without a country.
The present global financial crisis is unlike any in the past. It is deep and may continue for some more years. It started from the sub-prime markets in the US and then spread to the rest of the world. Many big banks became the victims of this financial crisis. However, the rapid response of ECB to the present global financial crisis in the shape of deep liquidity injections has transformed its reputation. The spread between 10 year US Treasuries and 10 year bunds can indicate Euro sentiment.
Another important interest rate is the Euro Interbank Offer Rate (Euribor). This is the rate offered from one large bank to another on interbank term deposits. Traders tend to compare the Euribor futures rate with the Eurodollars futures rate.
Lower spreads make the European assets less attractive. Higher spreads between the two rates makes the European fixed income assets more attractive. Merger and Acquisition activities between US and European multinationals have important implications for EUR/USD pair. Large deals if in cash have often significant short term impact on EUR/USD.
Important indicators for Euro are Harmonized Index of Consumer prices (HICP), M3, German Unemployment, Preliminary GDP that includes France, Germany and Netherlands, German Industrial Production, Individual country budget deficit. The largest countries in EMU are Germany, France and Italy. Study of the economic data of these three large countries is also important. - 23305
Now EUR/USD cross is the most liquid currency. All major euro crosses are highly liquid. The movements of EUR/USD currency pair are used as the primary gauge to judge the health of both European and the United States health. Euro is also known as the anti-dollar since it is the dollar fundamentals that have dictated the movements in the EUR/USD pair from 2003-2008.
EUR/JPY and EUR/CHF are very liquid pairs too and are used to judge the health of the Japanese and Swiss economies. EUR/USD and EUR/GBP are great trading currencies as they have tight spreads, make orderly moves and rarely gap.
Euro is still a new currency. It was launched in 1999. Euro has unique risks. There are number of risks unique to the Euro. The most important is the exposure to the economic, political and social development of 15 member countries in the EU.
Although more countries are expected to join EMU, however, if a member country drops Euro and reverts back to its original national currency because it believes that ECB actions are not in its best interests, it could affect the stability of the entire region.
ECB has the power to determine monetary policy for its 15 member countries. With that comes the political pressure of 15 governments. Making monetary policy is a challenging task to do for one country what to talk of a group of 15 countries. This political pressure frequently tests the actions of ECB. We can say Euro is a currency without a country.
The present global financial crisis is unlike any in the past. It is deep and may continue for some more years. It started from the sub-prime markets in the US and then spread to the rest of the world. Many big banks became the victims of this financial crisis. However, the rapid response of ECB to the present global financial crisis in the shape of deep liquidity injections has transformed its reputation. The spread between 10 year US Treasuries and 10 year bunds can indicate Euro sentiment.
Another important interest rate is the Euro Interbank Offer Rate (Euribor). This is the rate offered from one large bank to another on interbank term deposits. Traders tend to compare the Euribor futures rate with the Eurodollars futures rate.
Lower spreads make the European assets less attractive. Higher spreads between the two rates makes the European fixed income assets more attractive. Merger and Acquisition activities between US and European multinationals have important implications for EUR/USD pair. Large deals if in cash have often significant short term impact on EUR/USD.
Important indicators for Euro are Harmonized Index of Consumer prices (HICP), M3, German Unemployment, Preliminary GDP that includes France, Germany and Netherlands, German Industrial Production, Individual country budget deficit. The largest countries in EMU are Germany, France and Italy. Study of the economic data of these three large countries is also important. - 23305
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Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in day trading stocks and currencies. Try Strignano's Forex Signals free. Discover a revolutionary Forex Robot Trading System!
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