Currency Markets: The Euro

Every world currency you can find today has a market price that is fluctuating, and the Euro is no exception to this rule. Euro when launched was a little above in the value than U.S. Dollar and soon due to purchasing power parity its price drifted upward against dollar. Till now it has never dropped down when in value than U.S. Dollar. Value of both the currencies i.e. Euro and U.S. Dollar is affected by a number of factors which influences the value of either euro and/or U.S. Dollar. While enlisting the factors, number one would be the monetary policies of both European Central Bank (ECB) and the Federal Reserve Bank (Fed).

European Central Bank decides to strengthen the Euro and intervene for the desired purpose, ECB might play with the Interest Rate Deferential, causing harm or decrease in the value of U.S. Dollar resulting the increased strength of Euro against Dollar. For the same purpose, Federal Reserve Bank can also design such policies which in result would strengthen the U.S. Dollar and damage the value of Euro.

Profits and Price Fluctuation of  the Euro

Other than above-mentioned factor, various things can affect the Euro/USD. Demand of Euro to pay off the trade payables by American importers or vice versa can also cause a huge effect on the price of both the currencies and bring huge fluctuations.

A huge population is getting benefits out of these fluctuations, they speculate the fluctuation and invest accordingly and in result get huge profits when the forecasts hit the right point at the right time.

Profits are directly related with the fluctuations, because more fluctuations would bring more chances to speculate and to earn profits. It is not only profit which is attached with these fluctuations as sometimes forecast could go wrong resulting in loses and making risk and loss directly proportional to these fluctuations in the Euro/USD.

Small investor should replicate the professionals move to save themselves from any loss and to minimize the risk.

Richard Cox

Richard Cox has a PHD in Macroeconomics and has taught the subject at the university level. He writes for several internet news outlets, including: CNBC, TheStreet.com, NASDAQ, and the Motley Fool.

Follow Richard on Twitter: @RCox_

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