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Benefits & Risks Trading EURGBP
Benefits of trading EURGBP
- This is a relatively stable currency pair.
- Highly liquid pair, presenting great trading opportunities.
- Opportunities to capitalise on small price movements.
Risks of trading EURGBP
- More volatility in GBP following exit from EU.
- Beware of interest rate changes by either ECB or BOE.
- Market sentiment influences this currency pair more-so than others.
What is the EURGBP and why trade it?
- The duo is alternatively referred to as 'Chunnel', which alludes to the undersea tunnel linking UK and France (Europe).
- The GBPEUR forex pair ranks as one of the top four most frequently traded currencies globally.
- Even though the British Pound has a long-standing history dating back to 775 AD, the Euro, on the other hand, emerged much later, specifically at the start of the 21st Century, in 1999.
- Developments and updates concerning the withdrawal of the United Kingdom from the European Union impacted the pair and resulted in more erratic fluctuations than usual.
- GBPEUR is a highly recognised cross-currency pair that allows direct trading between the two currencies, without the necessity of an intermediate conversion to US dollars (USD).
What drives the EURGBP?
- Economic announcements such as interest rates or GDP statistics, and political developments such as trade negotiations following Brexit.
- Initial trends in related currency pairs GBP/USD can influence exchange rates.
- Significant political occurrences like elections, trade declarations, and the recent Covid-19 policies can impact the forex rates of GBPEUR.
- Updates on monetary policies, which involve regulating interest rates, managing inflation, and money supply, usually have a transient effect on the trading exchange rate of EURGBP.
- The Bank of England (BoE) and the European Central Bank (ECB) oversee the monetary policies of the Pound and the Euro, respectively.
When is the most active time to trade the EURGBP?
The most active time to trade the EURGBP currency pair is typically during the European session, specifically between 8:00 AM and 4:00 PM GMT, as this is when the majority of economic data and news releases related to the Eurozone and the UK are announced. Additionally, there may be increased volatility during the overlap of the European and US trading sessions, which occurs from 12:00 PM to 4:00 PM GMT.
What are the advantages of trading the EURGBP?
- The considerable trade volume and excellent liquidity of the asset result in tight spreads and negligible slippage during trades.
- The asset's strong correlation with other significant currency pairs makes it possible to implement effective hedging strategies.
- As political and economic events can significantly impact the exchange rate of the EURGBP, this can provide opportunities for traders to profit from news-driven volatility.
- The EURGBP typically has tight bid-ask spreads, which translates to lower trading costs and enhances the profit potential of trades.
When can I buy EURGBP?
EURGBP is available for trading 24/5, however the pair is generally at its busiest between 06:00 and 16:00 (GMT).
What happens when I buy EURGBP?
When you are buying EURGBP, you are of the opinion that the price of the EUR will strengthen against the GBP. The reverse is true for a Sell trade.
What platforms can I use to trade EURGBP?