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Your guide to trading the EUR/GBP pair

Capital.com's guide to trading EUR/GBP: Everything you need to know on how to trade EUR/GBP. No commission. FCA and CySEC regulated.
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Why is EUR/GBP important to traders?

As two of the most prominently traded currencies, the EUR/GBP pairing is extremely popular in global financial markets. With excellent liquidity and a high volume of continuous trade, it's no wonder that so many people trade EUR/GBP.

There is much more to the euro/British pound pairing than an exceptional level of liquidity. We're going to explain in-depth in the following sections why EUR/GBP trading is such an active and exciting market.

EUR/GBP

EUR/GBP trading hours

Theoretically, you can trade forex pairs 24/7, but there are prime times to trade the EUR/GBP when the currency pair is more volatile. The EUR/GBP is generally busy between 06:00 and 16:00 (GMT).

EUR/GBP history

To fully understand this pair – and why many choose to trade EUR/GBP over other currencies – we will first explore the origins of these two, how they came to be, and the euro sterling history.

As a relatively new currency, the euro has come a great way from its first inception. Originally introduced as a completely digital currency towards the end of the 20th century, the euro is now the national currency for a large proportion of the European continent.

The euro hasn't had a completely successful history, though. After the US sub-prime mortgage crisis, Europe experienced its own recession, and the euro experienced several large price swings as political and economic events buffeted the currency.  

The origins of the pound sterling date back centuries to around 775. Of course, it wasn't decimalised until 1971. At the moment, it is currently the fourth most-traded currency in the foreign exchange market and represents a significant portion of trades across the globe.

Past events which affected the rate of the pound sterling include: the depreciation of the US dollar in 1965 affecting GBP rates; the UK exiting the Exchange Rate Mechanism in 1992, and in 2001, when prices fell once again as the dot-com bubble of the 90s finally burst.

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Factors influencing the euro to pound rate

As highlighted in the previous section, recessions and economic crises can have a massive influence over the oscillating prices of currencies. In these next two subsections, we're going to explore what major factors out there play a role in euro pound trading, and how these factors can affect the strategies in use by traders and investors.

Role of euro

One of the key influencing factors on the euro to pound sterling rate is interest rates. Because of this, the European Central Bank (ECB) is one of the main financial institutions which traders and investors will closely follow.

Each month the ECB will release reports which provide data on the future economic outlook and the levels of interest rates throughout Europe. Utilising these figures, investors and traders will try and forecast what impact this will have on the euro pound price in the market.

One other major factor which plays a large role in the movement of EUR to GBP rates is economic data, such as the employment figures across Europe. These consolidated figures are freely available and have played an important part in EUR/GBP history.

Role of GBP

The price of the pound sterling is affected by a large number of factors, the largest of which would probably be monetary policies enacted by the Bank of England (BOE). For example, whenever the BOE deem inflation is rising too quickly, they can utilise monetary policy tools to try and control this. These changes in interest rates are something that traders and investors keep a close eye on.

The overall performance of the economy across the United Kingdom also affect currency values immensely. There are three gross domestic product (GDP) reports which are released: preliminary GDP, revised GDP, and final GDP. All of these are important as an indication of the economic health of the UK and will be watched by both traders and investors.

 

How to trade EUR/GBP

In the next two subsections, you're going to discover why traders and investors around the world choose to take part in EUR/GBP trading and why CFDs (contracts for difference) on forex are one of the most popular options for doing so.

Trading CFDs on EUR/GBP

The choice to trade on the EUR/GBP pairing isn't an especially difficult one, but how exactly to go about it is definitely something that can cause some confusion. Thankfully, the option to trade via CFDs almost entirely eliminates many of the worries that people have, because of how easy the process is.

CFDs are essentially just a form of derivative trading and have proven to be very popular with investors and traders around the globe. They offer the ability to trade speculatively on currency pairings like EUR to GBP. Because you don't actually have to own the currencies themselves, you can speculate long or short-term on the future price direction, as a way of trying to profit from the rise and fall of the euro to pound rate and a variety of other currencies.

Why trade EUR/GBP CFDs with Capital.com?

Advanced AI technology at its core: A Facebook-like News Feed provides users with personalised and unique content depending on their preferences. If a trader makes decisions based on biases, the innovative News Feed offers a range of materials to put him back on the right track. The neural network analyses in-app behaviour and recommends videos, articles, news to polish your investment strategy.

Trading on margin: Providing trading on margin (30:1 for forex pairs), Capital.com gives you access to the EUR/GBP pair with the help of CFDs.

Trading the difference: By trading CFDs on EUR/GBP,  you speculate on the rise or fall of its price. CFDs trading is no different from traditional trading in terms of its associated strategies. A CFD trader can go short or long, set stop and limit losses and apply trading scenarios that align with his or her objectives.

All-around trading analysis: The browser-based platform allows traders to shape their own market analysis and forecasts with sleek technical indicators. For instance, a trader could choose to have EUR/GBP analysis and forecasts as a big part of their feed. Capital.com provides live market updates and various chart formats, available on desktop, iOS, and Android.

Focus on safety: Capital.com puts a special emphasis on safety. Licensed by the FCA and CySEC, it complies with all regulations and ensures that its clients’ data security comes first. The company allows to withdraw money 24/7 and keeps traders’ funds across segregated bank accounts.

FAQs

Many people are familiar with the concept of commission through traditional trading, where a broker will earn commission on the buys and sells made by customers. With CFDs on forex trading, however, Capital.com do not charge commission. They earn their money through the bid-ask spread.

As an interbank market, the foreign exchange market operates slightly differently to other markets. There is no central exchange and large financial institutions trade with each other to create the market. Because of this, the volumes are huge in comparison to other financial assets, which actually lowers the overall costs.

As it's a speculative purchase you are making on the foreign exchange market, it helps to think of the transaction like this: if you believe the euro will rise and pound will fall, then by buying EUR/GBP in one transaction using CFDs, you would be buying the euro and selling the pound.  

'Pip' simply means 'percentage in point' and is a common phrase that you may see in day-to-day activity on the Forex market. In the simplest terms, a pip is just the smallest increment of trade in that particular forex market. EUR/GBP is quoted to four decimal places, so a pip is just the lowest possible amount that can be added or subtracted to this figure.

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