Although not the most popular currency pair, many Forex traders choose to trade EUR/GBP due to its volatility. Check out our EUR/GBP trading guide and find the best online brokers to trade this currency pair.
Brokers to trade EUR/GBP
CFD Service. Up to 80.6% of traders lose money.
What is EUR/GBP?
The Euro, the official currency of the Eurozone, is the second most traded currency internationally while the pound sterling or GBP, the official currency of the United Kingdom, is in fourth place in the ranking. The EUR/GBP cross, meanwhile, is in eighth place on the list of currency pairs chosen by the largest number of Forex traders and is equivalent to the amount of pounds sterling needed to buy one euro.
A couple of peculiarities of the EUR/GBP currency pair: it can be quoted in both directions (EUR/GBP and GBP/EUR) and its quote includes 4 decimal places. In recent years, EUR/GBP trades accounted for 2% of the total number of trades registered by Forex brokers. The fluctuation channel of the Euro/GBP cross has remained between 0.5673 and 0.9800.
How are EUR/GBP rates set?
As always, this task falls to the central banks, which are responsible for setting the interest rates for each currency. In the case of the pound sterling (GBP) it is the Bank of England or Central Bank of Great Britain. The interest rate for the Euro (EUR) is set by the European Central Bank (ECB). Interest rates are published on a weekly basis.
How to trade the EUR/GBP currency pair
The EUR/GBP is historically not very volatile, which means that we can observe limited fluctuations and long lasting trends in its prices. This is called a trend cross and makes EUR/GBP a currency pair suitable for speculation, day trading or CFD trading.
Why do interest rates matter when trading EUR/GBP?
Comparing the interest rates of the euro and the pound is perhaps the most essential part of both positioning and closing. One thing to bear in mind is that the higher the interest rate of one currency, the higher the profit when reselling it against another currency.
This is why interest rates play an enormously influential role in the Forex market, almost above any other external factor or the price of each currency.
Main factors influencing the EUR/GBP pair
All currency pairs can be affected by a number of domestic and international factors. These include inflation, local interest rates, GDP, unemployment rate, economic policies, etc.
Therefore, political or economic decisions affecting the Eurozone, the UK or both at the same time (Brexit) should be used as indicators when forecasting the evolution of the exchange rates of these two currencies.
EUR/GBP at a glance
- The Euro is the second most traded currency in the world and the pound is in fourth place.
- The Euro is the official currency of the 17 states that make up the Eurozone while the pound is the official currency of the United Kingdom.
- EUR/GBP is also traded as GBP/EUR and is a frequently traded Forex pair.
- It is a very volatile pair, which makes it ideal for day trading or CFDs.
- The pound sterling is a very strong currency and since the introduction of the Euro is the oldest currency in the world.
- Domestic and international factors affect the EUR/GBP exchange rate.
- Interest rates play an important role in trading this or any other currency pair.
If you decide to trade EUR/GBP, don’t forget to trade with a reliable and regulated broker. If you plan to trade on mobile devices, we suggest you check out our list of the best trading apps.
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