In Forex Currency Trading one of the most renowned liquid currency pair is EUR/USD and it is also known as a major currency pair in Forex market. Most of the Forex Currency Traders prefer to deal in EUR/USD and dealing in this particular pair allows traders to take advantage of two largest economies in the world. Traders keep a sharp eye on the latest market trends to determine volatility, liquidity intrinsic and make profits by either buying or selling this particular pair.
One of the major factors that influence EUR/USD Forex currency trading pair is the relative power of the two economies that is United Stated and European Union. United States is the one of the largest national economy with GDP of $14 trillion. Furthermore, U.S. dollar is the most widely held and it is traded all over the globe. On the other hand, European Union is one the biggest economic region in the world with a GDP of $13 trillion.
Moreover, interest rate plays an important role in determining the relative power of these economies. When interest rates of United States or European Union increases or decreases with respect to each other it can directly result in appreciation or depreciation of currency value. Consider for example if the interest rates in United States were to be increased as compared to European Union then US dollar will be stronger than Euro and if the interest rate is higher in EU than US dollar will weaken in the market.
It turns out that the year 2015 in Forex currency trading pair belonged to central banks with reference to EUR/USD pair. As we had seen earlier in the month of December that Federal Reserve had announced to hike the rate by 25bp and ended its facilities program with the objective of “return back to normal” in the third quarter of last year that is October 2014. Furthermore, it was also seen that the traders were reluctant to make any significant or major trade moves in the third of week of December 2015 as most of the traders were busy with holiday festivals.
Moreover, European Central Bank in the beginning of the year 2015 announced a €1.1 trillion quantitative easing program which continued to expand softly throughout the year. At the start of the year EUR/USD pair was at 1.2101 and it settled at 1.0901 by the end of year.
As the New Year is just around the corner it is expected that EUR/USD Forex currency trading pair will increase next year. Furthermore, there can be strong recovery of EUR/USD pair in the first quarter of 2016. Federal Reserve’s next rate hike is also expected to take place in March or April. FED’s decision to tighten the monetary policy can directly influence the value of pair.
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