The particularities of the EUR/GBP
The EUR/GBP currency pair is the eighth most traded currency pair on the Forex and it is quoted with four decimal places according to its supply and demand.
Another particularity of this currency pair is that it can be quoted either way. You can therefore sometime see this currency pair quoted as GBP/EUR by some brokers.
As the EUR/GBP currency pair is known for having a relatively low volatility, it is renowned for being a trending pair. This signifies that this pair can frequently be observed as experiencing very long rising or falling trends with little intermediate fluctuation. It is therefore recommended to trade this pair using traditional trading methods and avoid using CFDs or day trading as they are less profitable due to this pair’s low volatility.
Historically, the EUR/GBP currency pair has always moved in a fluctuation channel of between 0.5673 and 0.9800.
Although the majority of people know of the central bank related to the Euro, the ECB, it should be noted that that of the Pound Sterling is the Bank of England, otherwise known as the BoE. It is therefore important to follow all news and all communications relative to these two financial institutions to follow the current trends and those to com for the EUR/GBP.
Which organisations fix the EUR/GBP interest rate?
The large central banks are therefore the entities responsible for the fixing of the currencies interest rates. For the Euro it is of course the Central European Bank that determines and modifies the rate. For the British Pound, the interest rate is decided by the Bank of England, the central bank for Great Britain.
These rates and their movements are published weekly in the economic calendar.
Why the rates influence the price of the EUR/GBP:
The interest rates of the currencies are undoubtedly the most influential elements on the Forex market as they alone determine which currency can be most attractive without taking into account the exterior elements or the movements of the currency pair rate of which they form a part. In fact, the higher the interest rate of a currency, the more profit it can make at its resale against another currency.
It is therefore essential to compare the interest rates of the Euro and Pound Sterling at the time when you take position and also the time when you close it.
What are the factors that influence the EUR/GBP rate?
As with many of the Forex pairs, the EUR/GBP is highly sensitive to numerous exterior factors. Firstly, the effects of an announcement are certainly highly influential on the short term rate. To be sure not to miss important communications you should consult the economic calendar on a daily basis, especially the morning between 10h and 11h for news concerning the Pound Sterling and before 14h30 for that relative to the Euro Zone.
The most important signals to follow are, in order, the GDP of each of the zones, the capital input and withdrawal, the monetary policies, inflation, and, in a global manner, all the political and economic events that could produce a psychological impact on the investors and encourage them to buy or sell their positions.
Equally do not forget to take account of the exchange rate of each of these currencies with other international currencies. It is known for example that when the Euro or Sterling Pound lose ground against the American Dollar, this favours their competitiveness for export and, over the medium term, enables a recovery in the economy so leading anew to a rising trend.
The importance of the support and resistance levels in the analysis of the EUR/GBP currency pair
As the EUR/GBP currency pair has a low volatility, the traders that speculate on this value place great importance on the support and resistance levels observed on the charts in real time.
The technical analysis holds a fundamental place in the deduction of forthcoming trends and you need to be ready to act at any time according to the different psychological thresholds.
Of course, the ideal is to couple this information from the fundamental analysis with that originating from the technical analysis to have an overall significant view of the market.