The euro, of course, isn’t very old by historical standards – with origins dating back to 17 92 and the formation of the US dollar. Over the years, however, the euro has grown significantly in value and, paired with the dollar, has developed into something of an international standard among traders and investors. For example, it has become almost synonymous with financial safety for most European countries. If you don’t have anything in the way of cash abroad, you’re probably aware of the fact that just about every single European country is in some kind of economic or currency trouble. To this end, the euro has become the safe haven by which investors and traders try to minimize their exposure to risk.
It’s not just Europe that’s been affected by the recent global crisis, either. Foreign exchange traders and investors across the world have been watching the movement of the euro as well, particularly following the onset of the latest recession in the UK. And while the situation in the UK has been nothing like that experienced by other countries, it does represent one of the more important issues involving forex trading and investing. After all, many traders and investors use the currency markets to exploit small amounts of opportunity each day. In a situation where many countries are struggling to maintain their political stability or economic growth, a stable and attractive currency pair becomes an even more attractive option.
One thing that investors and forex trading experts are beginning to realize is that the euro isn’t going to remain the same for the foreseeable future. That’s why they’re so fond of the euro – its ability to maintain strong gains when compared to the dollar. The euro has already reached new highs on several occasions, and it’s only natural for traders to look for similar opportunities elsewhere. Whether it’s the prospect of substantial interest rates from European countries or the chance of recession in the UK, it’s quite possible that the euro will continue to increase in value against the dollar over the coming months and years.
This is actually a good thing for the euro in terms of an investor’s portfolio. Because the exchange rate between the euro and the US dollar represents two different market rates, a stronger euro usually means that your investments can earn you more money. The EUR/USD stands at roughly 1.2 to the dollar, which means that if you have funds invested in the euro and are in the US, you stand to make more from those investments if the exchange rate moves in your favor. In order to determine whether a particular currency pair will do this for you, it’s best to look at the past few months’ worth of data.
This information will allow you to see which currency pairs have done well during times of financial duress. It’s no secret that currencies tend to consolidate during times of economic and political uncertainty. While the UK and the euro have struggled mightily in recent months, emerging markets such as India, Brazil, Russia, and other countries have risen on the strength of their currencies. These emerging markets offer investors a much wider range of possibilities and potentially greater long term stability, so the euro may not be a bad choice if you’re looking for the opportunity to make more money in less time.
But for forex traders, the euro and the US dollar represent completely different markets. When you put money in a trading account, you want to make sure that you’re getting the most bang for your buck. If you’re currently investing in pairs like the GBP/USD, you’re looking at a profit potential that ranges between ten and thirty percent on a daily basis. With the euro having already lost forty percent of its value against the dollar already, this isn’t going to change anytime soon. If you want to put your money in the forex markets when the euro is under this type of pressure, you need to look elsewhere.
There are however, other pairs of currencies that will offer you even greater potential for profit. The euro and the GBP/JPY are two of the best performing currency pairs on the global market right now, and they offer the opportunity for you to make a lot of money with very little effort. If you’re trading these types of pairs, it’s absolutely essential that you have an excellent understanding of the underlying reasons why they’re performing so well.
One of the major drivers behind the strength of the euro/GBP is the fact that there is so much debt from Europe in the US. Europe wants to pay its bills, but it can’t because of the problems at the global scale. This is actually creating a feedback loop, as more European debt leads to more US dollars being printed, which eventually causes even more depreciation in the euro. This situation is similar to what happened to the US during the Great Recession, but on a much smaller scale. Because this is a much smaller market, however, there is less risk of losing large sums of money if the market does suddenly turn against the euro.