EUR/GBP - A Report Brought to You by Q8 Trade
Factors affecting the performance of EUR/GBP pair
A currency is the tool that is used when exchanging goods or services between one person and another and there is a group of currencies that are classified in the list of the most famous international currencies.
This is due to their significant economic impact and the widespread use of them in many countries worldwide.
The EUR/GBP pair is especially distinguished as it monitors the performance of two currencies that are considered one of the most important currencies of the European continent.
Most of the 19 European countries deal in the euro currency while the British pound is the currency of Britain which is a strong global economy.
The EUR/GBP pair means how many pounds is required to buy one euro, and this currency pair is considered to be one of the most traded pairs,
In most cases, the currency pair tends to be relatively stable due to the large intertwining of European and British economies and the exchange of huge amounts of capital throughout the day between all European countries and the United Kingdom.
A historical overview of the EUR/GBP currency pair
Here’s a quick history lesson:
The euro was officially launched for circulation in 2002. Before this date, each member state of the European Union had its own currency.
When trading began in the euro, some members of the European Union decided not to adopt the euro, among them Britain, which maintained its long-term base currency, the pound.
The British pound has had one often strong competitor, the euro which has become an unimaginable force in the global currency market.
Euro (EUR): It is considered the official currency of the European Union, as it is a group of European countries that established an economic bloc among themselves to launch a unified European currency and the adoption of the name of the euro officially in 1995 so the group of European countries was launched in the name of.
The euro area which includes 19 countries for the European Union including Austria, Germany, Italy, Ireland, the Netherlands, Spain, Portugal and 9 other countries that are not from the European Union group but are governed by the European Central Bank system, and the goal of creating one currency was to achieve complete economic stability in the euro group and the elimination of problems related to foreign exchange between European countries.
Pound sterling (GBP): It is the official local currency of the United Kingdom of Great Britain and Northern Ireland and it is also called the pound or sterling.
Did you know?
Britain’s economy ranks fifth in the world and the change in the value of GDP affects the price of the British pound.
And here’s another trivia:
Geographical convergence between Britain and the European Union causes the participation of trade exchange between them so there is an enormous amount of exports and imports flowing in both directions and this makes the economies mainly dependent on each other.
Britain’s secession from the European Union in 2016 (more popularly known as Brexit) affected the two currencies and caused them fluctuations in price.
There are many factors that affect the EUR/GBP currency pair, including:
Interest rates: where the British pound is affected by the monetary policy of the Bank of England especially interest decisions and on the other side, the euro is affected by the decisions of the European Central Bank.
In most cases, fluctuations in the price of the two currencies are made when central banks announce their interest rate decisions.
Financial reports: Financial reports such as GDP reports, consumer price indicators, employment reports, etc., have a direct effect both on the euro and sterling as these reports are issued periodically and may produce huge price fluctuations for the currency pair.
US dollar: It is the most powerful currency in the world and is often measured in comparison to all other major currencies.
Brexit: It may take several years for the impact of Britain’s exit from the European Union to appear as the impact of Britain’s separation from the intertwined trade between the two sides may continue.
Who should include EUR/GBP in their portfolio?
Currency traders: The EUR/GBP is one of the most popular pairs so many traders working in the foreign exchange market want to invest on it.
Daily traders: Many traders prefer to take advantage of the price fluctuations of currencies to achieve quick gains due to the sharp fluctuations in the currency market continuously and the EUR/GBP is a good choice for these types of traders due to the increase in trading volume and liquidity.
US dollar traders: Currency traders who always care about the US dollar can invest in the EUR/GBP pair as a way to increase their diversity in an investment.
Key analysts: Different currency pairs are often affected by financial reports, news and events that relate to it. Traders who are interested in fundamental currency analysis can add the EUR/GBP within their portfolios.
EUR/GBP trading via CFDs
CFD is short for contracts for differences which is one of the main sustainable options for investors in the electronic trading market due to several factors.
The most important of which is the ease and gains that many people obtain, whether the financial instrument’s price is going up or down.
Trade in contracts for differences is increasing in recent years.
With CFDs, you do not buy the currency in real terms so you enter into a contract with another broker and the price difference between opening and closing is the percentage of profits.
You can benefit from price movements even if the market is in decline. You are not buying the underlying assets, and this helps you open positions with large amounts.
CFDs can be defined as trading in price differences for specific financial instruments, whether this change is an increase or decrease, as trading in contracts for difference allows you the gains from the movement of currencies and financial instruments even if you do not have the financial instrument itself.
How do you trade EUR/GBP via CFDs?
Here’s what you need to know:
The EUR/GBP is a popular choice for many traders.
Many traders prefer to trade this pair through contracts for difference as it enables them to speculate on the movement of the price of currency pair without the need to own the actual currency.
- All you have to do is to select the asset of the currency pair which the broker offers for trading as CFDs.
- Then, you open a position and determine the state of the purchase and the amount you are investing in.
- Concluding a contract between you and the broker and the opening price of the deal is agreed upon, and additional fees, if any.
- The deal opens and is not closed unless you decide to or if you set conditions in which the deal is closed automatically.
- In the event that the deal is closed on a profit, the broker pays you while in the event the deal is closed on a loss, the broker charges you with a fee.
If you make the decision to trade the euro against the British pound and you think that the value of the euro will rise against the pound sterling.
In this case you’ll place a buy and if your prediction is correct, you get the difference in the price.
The euro is trading at 1.1640 / 1.1650 and you have expectations that the euro will rise against the British pound.
So you buy 100 standard contracts from this pair through CFDs at 1.1650.
After a while…
The pair increased by 30 points and the new price is 1.1670 / 1.1680 so you have decided to close your position by selling the 100 base CFDs at 1.1670.
By buying at 1.1650 and selling at 1.1670, the difference here is 20 points.
And because you bought 100 base contracts for the difference in this pair, your profits are 20 x 100 = 20,000 pounds.
The base contract value here is (10,000 €) and the point is equal to one £.
Benefits of EUR/GBP trading via contracts for difference
Leverage: CFDs can increase your investment capital as it is required that when opening a certain position, you need to deposit a small portion of the total value of your trading volume called margin.
1:30 leverage allows trading of $3,000 with a deposit of only $100.
The amount of gains is calculated based on the full value of the CFDs.
When depositing a small amount in the beginning, you can expect a large return although at the same time, you may experience significant losses as well.
Selling: Because CFD trading is an agreement to exchange the difference in the opening and closing price of a deal, it allows you to trade in markets that are declining and that takes the ascending curve.
When trading CFDs, you will see two prices, one is the purchase price and the other is the selling price.
You trade at the purchase price if you expect the market price to rise and trading at the selling price when you expect the market price to decrease.
Increased trading opportunity: CFDs increase trading opportunities, where you can make gains even in the markets that are going down.
Remember: A CFD is an agreement to exchange price differentials at the beginning of a deal opening and closing.
If you believe that the euro will devalue against the British pound, use the “sell” option and in case if your prediction is correct, you will close the deal by buying the underlying asset and the price difference is considered your gain.
Trading in gain and loss: The most important characteristic of trading in CFDs is that you are the one who trades and invests in the price difference and therefore, you can make gains from the rise or fall of the share price.
All you have to do is expect how the market will move before trading.
No stamp duty: Contracts for difference are not subject to stamp duty depending on individual circumstances and jurisdiction.
The ability to hedge: It is one of the methods that can be used during trading and indicates that in the case if you are in a losing transaction, you can open a counter transaction at the same time, achieve profits and this will have a significant impact in reducing the loss.
You trade in the euro against the pound sterling and you already bought some pairs at a high price, but due to weak European reports, the euro is on the way down.
So, you think you will lose, but NO!
You can also make profits even with negative price movements. This protects your private investment.
In the end…
You as trader must have sufficient knowledge and information about how financial derivatives such as contracts for difference and the size of potential gains and losses from their trading work, so that you’ll be able know if this type of investment is appropriate for you or not.
How to trade the EUR/GBP pair with Q8 Trade?
Choose the financial instrument:
At first, choose the euro against the pound sterling as the trading tool that you want to invest in.
Q8 Trade provides over 300 financial instruments. It offers the ability to trade CFDs through a wide range of tools including forex, commodities, indices, stocks and cryptocurrencies.
Select the type of deal:
Select the type of deal you want to speculate on.
In the event that you think that prices will rise, in this case, select Buy and in the event that you expect that prices will decrease select Sell.
Enter trading volume:
Enter the number of units you want to trade from the EURUSD pair.
Q8 Trade provides a stop-loss setting on their platform, ensuring that your position is closed at the price you set regardless of fluctuations or gaps in the market.
Watch your deal:
You should monitor your position well, including the stop-loss or take-profit orders, so that you can track your gains or losses in real time.
Close your position:
In the event that your position is not automatically closed as a result of the stop-loss or take-profit orders, you shall close it at the time it deems appropriate to you.
Why trade the EUR/GBP pair with Q8 Trade?
First of all..
Q8 Trade provides a leverage for trading in the EURUSD pair so you will only need small capital to start your trade.
This trading platform provides real-time currency rates which will can give you the advantage to place a buy or sell wisely.
Trading CFDs is a contract between you and Q8 Trade and it is characterized by the absence of exchange fees as you do not own the actual asset.