A Trader's Introduction to the Euro, Part II 
A Trader's Introduction to the Euro, Part II
by InformedTrades
Video Lecture 45 of 61
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Date Added: May 7, 2017

Lecture Description

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.

Course Index

  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

Course Description

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.

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