www.informedtrades.com/42612-traders-introduction-euro-part-ii.html

As we discussed in our last lesson, the Euro was launched as an electronic currency on January 1st 1999. As you can see from this chart, the markets initial confidence in the Euro, and really the European Union as a whole, was initially not very high. Over the next year the currency sold off from just above 1.1600 dollars to 1 Euro at its inception, to a low point of around .8200 cents to 1 Euro towards the end of 2000. While the tables have turned now in the Euro's favor, it actually took the European Central Bank intervening in the markets and buying Euros, to keep the currency from sliding further in 2000.




The launch of the Euro was the largest monetary changeover ever, and as you can see, was not guaranteed success. As we touched on in our last lesson, getting a dozen countries, which varied widely in their economic and political clout, to give up control over their own monetary policy and switch to a more centralized monetary system, was no easy task.

As we learned about in module 8 of our basics of trading course, one of the most powerful tools that countries have to try and manage their business cycle is monetary policy, a tool which those adopting the Euro were essentially giving up. Although we have not seen a real test of this yet, you can imagine a situation where the economy of one of the major countries in the EMU such as Germany, goes into recession, but overall growth in the rest of the EMU is steady. If Germany were not part of the EMU, they could cut interest rates to try and bring their economy out of recession. Since they are however, their hands would be tied in this situation from a monetary policy standpoint, which may drive their economy deeper into recession than would otherwise be the case.

As we also learned about in module 8 of our free basics of trading course, countries have a second tool to manage the business cycle, which is Fiscal policy. As the EMU nations are still primarily independent from a fiscal policy standpoint, they do still have this in their toolbox. The issue here however, is that one of the ongoing requirements established in the Massstricht treaty for countries which join the EMU, is that member country's budget deficits must be less than 3% of GDP. So here again member nations are someone limited in what they can do to help their own economies, should it falter.

Of all the things to understand about the Euro from a fundamentals standpoint, it is this that is the most important, as it is here that a true test of the Euro, will eventually come.

So far I think most would agree that the Euro has been a resounding success, and since the original 12 countries replaced their currencies with the Euro as their paper currency in January of 2002, 3 more EU member nations have joined the EMU, and 5 other countries outside the EU have adopted the Euro as their official currency.

As a result of its success and the large combined economies that the currency represent, many feel that the Euro will one day replace the US Dollar as the premiere currency of the world. If you have thoughts on this I would love for you to share them in the comments section below.

Thats our lesson for today. In our next lesson we will look at the major economies of Europe which traders watch closely for fundamental direction in the currency so we hope to see you in that lesson.

1. An Overview of the Forex Market
2. The Difference Between Over the Counter (OTC) and Exchange-Based Markets
3. Who Really Controls the Forex Market?
4. The Role of the Retail Forex Broker
5. How Central Banks Move the Forex Market
6. How Banks, Hedge Funds, and Corporations Move Currencies
7. A Breakdown of the Forex Trading Day
8. Forex Trading - Characteristics of the Main Currencies
9. Setting Up Your Forex Trading Software
10. Forex Trading - How to Read a Currency Quote
11. Forex Trading - Understanding Currency Rate Movements
12. Forex Trading - Understanding the Bid/Ask Spread
13. How to Place Your First Forex Trade
14. How to Determine Your Position Size in the Forex Market
15. Forex Trading - Pips and Fractional Pip Pricing
16. How to Calculate Forex Trading Profits and Losses
17. An Introduction to Leverage in Trading
18. How Trading on Margin Works
19. How to Calculate Leverage in the Forex Market
20. How to Calculate Leverage in the Forex Market Part 2
21. How to Place a Market Order in the Forex Market
22. How to Place a Stop Loss and Take Profit Order in Forex
23. How to Place A Pending Entry Order in the Forex Market
24. How Rollover Works in Forex Trading
25. How Rollover Works in Forex Trading Part 2
26. Free Forex Charts Userguide
27. What Moves the Forex Market? - Trade Flows
28. How Capital Flows Move the Forex Market
29. The Current Account: How Forex Traders Can Use it to Identify Opportunities
30. Interpreting the Capital Account and Measuring Capital Flows
31. Fundamentals that Move Currencies - Balance of Payments
32. How Interest Rates Move the Forex Market Part 1
33. How Interest Rates Move the Forex Market Part 2
34. How To Trade the Carry Trade Strategy Part 1
35. How To Trade the Carry Trade Strategy Part 2
36. How To Trade the Carry Trade Strategy Part 3
37. Fundamental Analysis Vs. Technical Analysis in Forex
38. Forex Trading Fundamentals Quiz - Test Your Knowledge
39. Why the US Dollar is Still King
40. Determining the Fate of the US Dollar
41. Determining the Fate of the US Dollar Part II
42. Determining the Fate of the US Dollar, Part III
43. Economic Releases that Move the US Dollar
44. A Trader's Introduction to the Euro
45. A Trader's Introduction to the Euro, Part II
46. A Trader's Introduction to the Euro, Part III
47. A Trader's Introduction to the Yen
48. A Trader's Introduction to the Yen, Part II
49. A Trader's Introduction to the Japanese Yen, Part III
50. A Trader's Introduction to the British Pound
51. A Trader's Introduction to the Swiss Franc
52. A Trader's Introduction to the Canadian Dollar
53. A Trader's Introduction to the Australian Dollar
54. A Trader's Introduction to the New Zealand Dollar
55. Why Choosing a Forex Broker is so Confusing
56. Choosing a Forex Broker: Regulation and Financial Stability
57. Choosing a Forex Broker Part III: Transaction Costs
58. Choosing a Forex Broker, Part IV: Technology & Add-ons
59. Choosing a Forex Broker: Evaluating Customer Service
60. An Introduction to Forex Capital Markets (FXCM)
61. An Introduction to DailyFX Plus

This 61-video series is an introduction and in-depth look at the forex market, including how to place trades, the fundamentals of the forex market, profiles of the main currency pairs, and factors to consider when choosing a forex broker.



This is a continuation of The Basics of Trading course by Informed Trades.