EUR/GBP is a popular currency pair in the trillion-dollar forex market. A good number of people looking to gain exposure to the European markets trade the currency pair given its excellent liquidity levels as well as volume levels.
Understanding EUR/GBP Pair
The currency pair pits the currencies of two of the biggest economies in Europe. The EUR on one corner is a national currency for a large proportion of the European economy. The GBP, on the other hand, is a national currency for the United Kingdom.
In its purest form, the EUR acts as the base currency in the EUR/GBP pair while GBP acts as the quote currency. In this case, EUR/GBP indicates the amount of British pound that one would need to purchase one Euro.
What is the best time to trade EUR/GBP
The forex market is opened 24 hours, five days a week. While it is possible to trade the currency pair whenever the market is opened, there are special times during the day when the pair experiences action in terms of price movements and volume levels
The EUR/GBP tends to be active between 06:00 and 16:00 GMT as this is the time when most European markets are opened. During this time, liquidity levels are high, making it possible to enter and exit trades at preferred price points.
Factors That Influence EUR/GBP Price Action
Just like any other currency pair, a number of factors influence the direction at in which the EUR/GBP moves in the forex market.
Interest rates as applied by the European Central Bank and the Bank of England influence a great deal how EUR/GBP price fluctuates in the forex market. For starters, whenever the ECB cuts interest rates the same tends to have a negative impact on EURO strength leading to a decrease in the EUR/GBP rate.
Similarly, whenever the BOE cuts interest rates leads to weakening of the GBP causing the EURGBP rate to increase. In this case, traders end up paying more British pounds to buy one Euro.
Economic reports also influence how EUR/GBP moves up and down in the forex market. GDP data, employment data as well as consumer price data from Britain, France, Germany, and Italy among other powerhouse in the European Market influence the strength of the EUR relative to the British pound.
Political developments in some of the biggest economies in the European market also affect the EUR/GBP rate.
How to Trade EUR/GBP
The best way to gain exposure to the EUR/GBP currency pair is by CFD trading. CFDs make it possible to take advantage of price movements and generate returns based on price difference.
That said, traders buy the EUR/GBP using CFDs whenever the Euro is strengthening relative to the British Pound. Similarly, CFDs makes it possible to sell and generate profits whenever the British pound is strengthening relative to the Euro.
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