The EUR / GBP currency pair is one of the most important FX currency pairs and not least guarantees practically unlimited liquidity due to the size of the two economic areas. Measured in terms of GDP and trade weight, the euro area is the largest contiguous currency area in the world, the UK is an established economy with the globally important financial center London.
Investors who are long positions in the EUR GPB expect the EUR to appreciate -Exchange rate charged to the pound sterling. Conversely, market participants who trade a short position in pound sterling assume that the common currency will depreciate.
Characteristics of the EUR / GBP currency pair:
- British pound Third most important reserve currency in the world
- EUR / GBP is of relevance with EUR / USD
- Belongs to the group of major pairs
- Is characterized by high liquidity
- The financial center London, the Banc of England and the ECB exert influence
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Trade EUR GBP with Forex: Process of a currency transaction
Private investors can open a position with one click via the trading platforms of FX brokers. Every position in the currency market has always been the same. In order to be able to trade euro pounds with Forex, an investor must first take out a loan in GBP with a long position and at the same time invest the liquidity generated in EUR. A long position in the EUR / GBP currency pair thus schematically consists of a GBP credit account and a EUR deposit account. In the event of a long position, the investor expects the euro to appreciate. If this occurs, the GBP loan can be repaid in full by exchanging the EUR credit, without the credit having to be used in full. What is left after the repayment is understood as the profit generated with the position. The margin usual in FX trading serves as collateral in the event that the market develops in the "wrong" direction.
The trading process with EUR / GBP takes place via a credit and deposit account. If the trader goes long with the currency pair, a GBP credit account and a EUR deposit account are opened. At the end of trading, the GBP credit account is balanced with the EUR deposits. The remaining euro amount represents the profit of the trader.
EUR GBP exchange rate in quantity and price quotation
The euro pound exchange rate is like most FX- Courses mostly given in the format of the quotes. It is rarely given in the format of the price quotation. The price in price shows how many units EUR for 1.00 GBP are exchanged on the market. The price in quotes, on the other hand, indicates how many units GBP are traded for EUR 1.00. The quantity quotation is the reciprocal of the price quotation. The calculation of the reciprocal value corresponds to the exchange of ordinate and abscissa in the chart.
The currency pair EUR / GBP is given in quotes rather than prices.
Trade EUR/GBP: A forex strategy trading EUR/GBP
Europe and Great Britain at the heart of the action
The British pound is one of the six most important currencies in the world. If its exchange rate changes, this affects EUR / GBP or GBP / USD. As a former world power, the traces of the former world power are still unmistakable today. Due to the widespread use of the pound, trade and exchange rate developments have a significant impact on the five major currencies in the world. Political decisions and the economic fall or rise of an EU country can immediately be seen in the strength of the euro, and rising unemployment rates or property prices in the UK have a direct impact on the British pound, and thus on the EUR / GBP and GBP / USD pair, The combination of a former world power with the eurozone as the largest, coherent zone with a single currency is a trading option for traders who want to get involved with sometimes impulsive exchange rate fluctuations. Trading in EUR / GBP is particularly suitable for professional traders. Due to the former world power position of Great Britain and Europe as the largest zone with a single currency, EUR / GBP is a currency pair that plays a very important role internationally.
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With the special significance of the British pound as the third most important currency, the EUR / GBP currency pair receives special attention. Up until the end of the 19th century, the British pound was the key currency. The shadow of the former key currency still exists today. It shows e.g. for those countries whose currency reserves are still invested in British pounds. This can be justified by the historical connection of the respective states with Great Britain. The swings in the ranges 0.7600 to 0.9100 have been typical of the EUR / GBP currency pair for years. If trade weight and GDP are used, the euro zone appears as the largest, coherent currency area. If the trader relies on trading decisions that include an exchange rate improvement of the currency pair, the trader expects an economic improvement in the euro zone. If the trader opts instead for a trading decision that aims at a falling exchange rate of the EUR / GBP currency pair, he expects an improvement in the British economy or an increased demand for British pounds.
Trading strategies for the purchase / Selling EUR / GBP
From the past to today it has been shown that the EUR / GBP currency pair likes to be traded with levers. Risk-taking traders opt for the EUR / GBP currency pair, for example, for Mini Future Short if they assume a falling EUR / GBP exchange rate. With levers over 20, for example, traders can make significant profits. When placing the stop price and the stop loss barrier, the applicable risk of loss must be taken into account at all times. With this Forex strategy, the trader should have sufficient trading experience. Experience can be gained through a demo account. It is not only worth training here in evaluating the charts and market analyzes. In addition, strategies should be tried out and their success curve noted. Beginners, in particular, get a quicker insight into which types of trade they belong to. Beginners can use the popular and simple trading strategy, the trend-following strategy, with this currency pair. To find the right entry point, it is advisable to analyze the price movements of the past years. Furthermore, beginners should get an overview of the current influences on the British pound and the euro. As an alternative to the follow-trend strategy, traders can use the contra-trend strategy.
Depending on the experience of the trader, simple strategies such as the trend-follow strategy or the contra -Trend strategy when trading the EUR / GBP currency pair is worthwhile. Experienced forex traders opt for more complex and riskier trading strategies instead. The Mini Future Short and Mini Future Long strategies are to be mentioned here.
Conclusion: Recommendation for trading with this currency pair
The currency pair belongs to the most important forex currency pairs in the world. Whoever trades EUR / GBP often also decides to trade EUR / CHF or EUR / USD. Trading EUR / GBP with Forex proves to be an interesting trade for both risk-averse and risk-averse traders.
The importance of the Banc of England and the London trading center is clear in view of the last financial crisis. The largest damage share of the financial crisis came from the trading center of the City of London. One more reason to keep an eye on the currency pair and exercise caution when trading.
In addition to Forex trading, the EUR / GBP currency pair is also traded in the binary options area.
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