EUR/USD - ratio Euro and The US dollar.
The symbol for the euro in the international interbank system is €. According to the share of SWIFT settlements, the euro ranks second (the first is the US dollar).
EUR, like all major currencies, is recognized by the International Monetary Fund as a reserve currency. States are allowed to form Gold-Currency Reserves in this currency, reduced to the exchange rate of the US dollar.
What makes this pair exceptional is the ratio of the currencies of two strong economies. The US measures the strength of the economy of the European Union countries, but the euro also rightfully acts as a kind of indicator of the US economy. A trader should take into account this" dualism " of the pair when the time of the release of important economic news from the fields of the Old and New World coincides.
Features of the European economy and currency
The euro is a young currency, born in 1999, created on the basis of the " ecu " (European Currency Unit), which replaced (canceled) a whole galaxy of national currencies of the EU countries, so one of the features of the euro is its susceptibility not only to the economic macrostatistics of the entire EU area, but also to individual economies of France, Germany, formerly Great Britain. Since the ecu served as the calculated index of the basket of currencies, first the EEC, then the EU, the exchange took place 1 to 1.
This is the most popular a currency pair in the world, which represents the two largest economies in the world. Euro was created to facilitate international trade of European trading partners. Since its creation in 1999, this currency pair has undergone a significant volatility, which was caused by several global events, such as the technological boom that turned into a technological breakthrough, the real estate price bubble and the European debt crisis. These events have not yet found a solution in the long term.
The role of the Issuer and Regulator of the pan-European currency is played by the European Central Bank (ECB). The main support for its creation in 1998 was the German banking system, the headquarters of the bank is located in Frankfurt am Main, the body itself was formed on the basis of the participation of all representatives from all countries of the European Union. In addition to issuing activities, supervision and regulation, the ECB Charter prescribes the duties of maintaining the financial stability of the Eurozone.
Impact of monetary policy
The monetary policy of this body affects almost all the currencies of the market Forex. The meetings of the European Central Bank are monitored, the dates and times of the meetings are known in advance. The announcement of the rate, if it remains unchanged, may not impress traders, causing a weakly volatile surge, unlike the press conference of the Head of the ECB, which sometimes forms long-term trends of the pair.
The ECB does not conduct speculative, loan and issue actions on the financial markets. These powers are delegated to the national banks of the European Union.
Recently, the ECB has been pursuing a policy of "zero rates", further stimulating the Eurozone economy with asset repurchase (QE). At the same time, the euro exchange rate has been strengthening for the last two years. The opinion of financial experts is ambiguous about this, in particular, some consider it a dead end, referring to the experience of the US Federal Reserve System.
The Fed is an independent supervisory federal agency that includes 12 reserve banks in different states, which in turn have thousands of commercial banks. The structure of the management hierarchy and the activities of the Federal Reserve are carried out on the basis of a special Law on the Federal Reserve. According to it, the Federal Reserve is a joint-stock company (with a special status of shares) managed by the state. But the decisions of this body on monetary policy issues are independent and are not subject to approval by any authorities (Congress, the President).
The Fed's policy course is aimed at abandoning zero interest rates and curtailing the bond repurchase program (QE).
The difference in the interest rates of the Fed and the ECB leads to the formation of swap when holding a position on this currency pair for more than a day. The size of the swap depends on the position held in the asset (purchase or sale), you can find out about it beforehand by looking at the contract specification on the Broker's website.
Features of the American economy and currency
No one and nothing can compare with the developed US economy. This is reflected directly in the foreign exchange market. It would be more correct to say that the market itself was created with the filing of this state in the late 70s, during the meeting of the "Big Seven" in Jamaica.
Traders have repeatedly observed how the combination of events that led to a strong growth of the pair on Asian and In the European sessions, it was "crossed out" in 15 minutes only because unemployment statistics were released in the US better (worse) than expectations. US GDP growth above expectations generated long-term trends, and an increase or decrease in the rate stopped and reversed long-term trends during one session.
The US dollar has many features:
- On the eve of important news (GDP, unemployment, rates) before the start of American session movements on major currencies freeze, degenerating into flat.
- In the absence of active trading by US traders due to national holidays, there is also a picture of a" lull " in the main world markets. Trading in the American session ends in the dead of night for Europeans, so the active part of the trading is small in length. If the calendar of economic events does not indicate the presence of news after 2100 Moscow time, the probability of trend movements and volatility jumps is very low.
- From 15-00 Moscow time the foreign exchange market is beginning to fall under the burden of news from the New World, the influence is increasing every hour, full control goes there from 18-00 Moscow time, when the trading session begins on the American stock exchanges, there is a surge in volatility on the main Forex currencies.
- With the arrival of the new Head of the Fed, the historically established order of the final press conferences of the Committee has changed. The speech of the Head was postponed to another day, earlier it took place on the day of the announcement of the decision on the amount of the interest rate.
The dimension of the pair is one digit before the comma, after the comma, depending on the accuracy of quoting your broker's currency instruments, there can be either 4 or 5 characters (1, 10226).