Guidelines for Major Economies: Eurozone

european union(EU)from27Composed of member states, it is composed of1951year6Developed from an alliance of neighboring countries. Constrained by the Maastricht Treaty, the European Union has gradually evolved into an economic and political bloc, becoming the world's largest economic zone and playing a significant role in international transactions and global economic affairs.

Among EU member states, there are17Member states choose to transfer the euro(EUR)As their unified currency. These countries formed the Eurozone, also known as the European Monetary Union(EMU)。

The members of this elite group include Austria, Belgium, Cyprus, and Estonia. Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia, and Spain.

In addition to adopting a unified currency, these countries also follow the guidelines of the European Central Bank(ECB)Formulating the same monetary policy.

Eurozone: Facts, Data, and Characteristics

• member stateAustria, Belgium, Cyprus, Estonia. Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia, and Spain.
• area：1,669,807Square miles
• population：501,259,840
• Population density：300.2Per square mile per person
• Chairman of the European CommissionBarroso(Jose Manuel Barroso)
• President of the European Parliament：Martin Schulz
• President of the European CouncilFan Longpei(Herman Van Rompuy)
• currency: Euro(EUR)
• Main imported goodsMachinery, automobiles, airplanes, plasticscrude oilChemicals, textiles, metals
• Main export commoditiesMachinery, motor vehicles, aircraft, plastics, pharmaceuticals and other chemicals, Banderas(Antonio Banderas)Cruz(Penelope Cruz)
• Import partners: China15.98%, USA11.97%, Russia11.22%Norway6.13%Switzerland5.14%
• Export partners: USA19.07%, Russia8.03%Switzerland7.49%, China6%Türkiye4.14%
• time zone：GMT，GMTDongyi DistrictGMTEast Second District
• website：http://www.europa.eu

Economic Overview

The eurozone includes more than half of the EU's countries. stay2011In, the eurozone9.4Trillions of eurosGDPBecoming the world's largest economy. The Eurozone economy is service-oriented, with service sector revenue accounting forGDPof70%。

In addition, the eurozone is the second most attractive investment market for domestic and international investors.

As an economic union, the eurozone has a standardized legal system, especially in terms of trade. The overall economic scale of the eurozone makes it an important participant in the international trading arena.

Because multiple countries emerged as the same entity, their transactions were promoted, especially with their first trading partner, the United States.

Actively participating in international trade makes the euro, as one of the reserve currencies, play a significant role.

This is because countries trading in the eurozone require a large amount of reserve currency to reduceforeign exchangeTrading risks and reducing transaction costs.

Monetary and fiscal policies

European Central Bank(ECB)It is the competent department for monetary policy in the European Union. Central Bank Governor Draghi(Mario Draghi)The executive board of directors of the leadership also includes1Vice Presidents and4Policy makers. Together with senior central bank officials from various eurozone countries, they form the European Central Bank Management Committee, which has the right to vote on changes in monetary policy.

The main task of the European Central Bank is to maintain price stability throughout the region - high demands! In order to achieve this goal, the countries of the eurozone have signed the Maastricht Treaty, which stipulates the code of conduct for each member state. Here are some of the regulations:

• A country's inflation rate cannot be better than its performance(Lowest inflation rate)The average inflation of the three countries is more than1.5%。
• Long term interest rates must not exceed those of these performing countries by more than2%。
• Within a certain period of time, the exchange rate should be within the exchange rate mechanism.
• The government deficit must not exceedGDPof3%。

If a country fails to meet the above requirements, it will be fined a significant amount.

The European Central Bank uses adjusting benchmark interest rates and open market operations as its monetary policy tools. The benchmark interest rate or refinancing rate of the European Central Bank is the rate of return that the central bank provides to member country central banks. The central bank uses this interest rate to control inflation.

Open market operations are used to control interest rates, control liquidity, and indicate monetary policy stance. These policies are achieved through the government's repurchase of government securities.

In order to increase liquidity, the European Central Bank buys securities, spends euros, and then circulates them. On the contrary, in order to address excess liquidity, the European Central Bank sold securities in exchange for the euro.

In addition to using monetary policy tools, the European Central Bank also intervenes in the foreign exchange market to reduce inflation. Therefore, traders need to closely monitor the comments of the management committee members, as they have a significant impact on the euro.

Understanding the Euro

They called me anti dollar!

The euro is known as the anti dollar, the euro/The US dollar is the most widely traded currency pair. At the same time, they also have the best liquidity and the smallest trading spread.

I am very busy during trading hours in London

Euro inGMT8:00——London trading hours - the most active. Next US trading hours——GMTafternoon5:00Left and right - usually with little change.

I have some connections.

euro/The direction of the US dollar is related to the movements of capital markets, such as bonds and stocks. It is related to the S&P, which reflects changes in the US stock market500The index shows an inverse correlation.

stay2007After the financial crisis in, the changes between the two were not synchronized. Current Euro/US dollar and S&P500The index shows a slight positive correlation.

euro/The Trend of the US Dollar and the US Dollar/The trend of the Swiss franc is inversely correlated, indicating that the Swiss franc basically moves in parallel with the euro.

Important Economic Indicators of the Euro

Gross Domestic Product: Gross Domestic Product mainly measures the economic growth of the region. As Germany is the largest economy in the eurozone, itsGDPThe impact on changes in the euro is greatest.

Employment changes: The euro is also very sensitive to changes in employment conditions, especially to changes in employment in the major economies of Germany and France in the region.

German industrial production: This data measures the total output of Germany's manufacturing and mining industries. Therefore, it reflects the strength of Germany's industrial activity in the short term.

GermanyIFOBusiness Prosperity Index: This is one of the important business surveys in the country. This survey is conducted monthly to study the current state of German business and expectations for the future.

Budget deficit: There is a provision in the Maastricht Treaty that states that economies within the eurozone must balance their debts withGDPThe ratio is controlled at60%Below, the deficit shall not exceed one yearGDPof3%. Failure to achieve these goals will lead to fiscal fluctuations in the eurozone.

Consumer Price Index(CPI)As one of the goals of the European Central Bank is to maintain price stability, they are very concerned about inflation indicators such asCPI. If the yearCPIIf it deviates from the central bank's goals, the European Central Bank will use monetary policy tools to control inflation.

What causes changes in the euro?

Fundamentals of the Eurozone

If the overall economic performance of the eurozone is good, or if its member countries perform well, then the euro is bullish. For example, unexpected Germany or FranceGDPThe report will make investors optimistic about the euro.

Changes in the US economy

The sudden change in market sentiment is mostly influenced by the impact of US economic data on the euro/The trend of the US dollar has a significant impact.

As an "anti US dollar" currency, the euro has also been influenced by the global foreign exchange reserves shifting away from US dollar assets and vigorously seeking diversification. Some have suggested using the euro as a new reserve currency.

Differences in returns

The yield spread between the US 10-year treasury bond bond and the German 10-year treasury bond bond will reflect the euro/The trend of the US dollar.

If the interest rate difference between two types of bonds increases, then the euro/The US dollar varies according to changes in currencies with higher returns.

Similar to bond yields, the difference in interest rates also reflects the euro/An important indicator of changes in the US dollar. For example, investors often compare Eurozone interbank offered ratesfuturesThe difference between returns and Eurodollar futures returns.

euro/USD trading

euro/The trading volume in US dollars is measured or priced in euros. A standard hand is10Ten thousand euros, the mini hand is1Ten thousand euros.

Each point is priced in US dollars and in euros/In the exchange rate expressed in US dollars, the fourth decimal place is one point.

Gains and losses are priced in US dollars.1In the case of standard hands, the value of each change is10USD; For a mini hand, the value of every change is1USD.

The calculation of margin trading is based on US dollars. For example, if the euro/The current exchange rate for the US dollar is1.4000The lever is100The minimum margin required for trading a standard hand should be1400USD.

euro/The increase in the US dollar exchange rate results in an increase in the amount of US dollar margin required. Euro/The decrease in the US dollar exchange rate results in a decrease in the amount of US dollar margin required.

euro/US dollar trading techniques

The bullishness of the euro usually occurs after the release of strong economic reports in the eurozone, giving rise to the euro/Dollar long trading brings opportunities.

The bearish trend in the euro usually occurs after the release of the weak economic report in the eurozone, which is the euro/The US dollar short trade provides the foundation.

Due to the Euro/The trend of the US dollar is usually used as an indicator of traders' attitude towards the US dollar, and understanding the movement of the US dollar will give the euro/Dollar trading provides some trading strategies.

For example, if a trader will buy US dollars due to a US retail sales report exceeding expectations, then you should short the euro/USD.

Besides waiting for the euro/Testing or breaking important support or resistance levels in the US dollar, trading based on pullbacks, is also feasible.

euro/The US dollar is very sensitive to pullbacks, which means that trading short or long at important Fibonacci levels can also earn money. By utilizing pullbacks, investors will receive a more appropriate price when entering a transaction than when jumping in the direction of price changes.

If you love adventure, there are other pairs of euros, such as euros/Japanese yen, Euro/Swiss franc and euro/GBP, available for selection. Each euro pair has its own uniqueness.

For example, Euro/The instability of the Japanese yen is higher than that of the euro/The US dollar is relatively active during trading hours in Asia and London.

euro/GBP and EUR/The changes in the Swiss franc have mostly been consolidating. Due to low liquidity, the latter is more prone to significant increases.