EURGBP

The Euro and the British Pound are a currency pair that have stable the two largest economies in Europe behind them. When you place a trade, you sell GBP and buy EUR. The difference between the EURGBP exchange rates can make profits for you. 

While this pair has been considered stable, it has some big spreads during volatile times. The economies of Europe and Britain depend on each other, but they do not rise and fall in tandem. Major moves by central banks in the two regions can drastically alter their exchange rates. So, you can find times when you can make profitable trades when the Euro rises against the Pound.

EURGBP Live chart: Current exchange rate

Here is a chart for EURGBP.

The "jagged" look of the chart shows you that the pair can make big moves. The value of the pair rises when the Euro gains against the Pound, and it falls when the Pound gains against the Euro.

Screenshot courtesy of TradingView!

How to trade EURGBP

Your order for this pair automatically buys EUR and sells GBP at the same time, so look for trends where EUR significantly outpaces GBP. This occurs when the Eurozone's interest rates rise faster than Britain's or Britain's economy struggles.   

Also, watch for currency interventions. These actions can make a country's currency stronger.  

Let’s look at some trading signals.

None of the results in the table are guaranteed, and these are just some common scenarios, but the idea is that traders want to see EUR significantly more valuable than GBP. 

Why trade  EURGBP

This pair is stable enough to give you some profits during less volatile times but can offer bigger profits during economic fluctuations for the Eurozone or Britain. More volatility can mean bigger spreads. If EUR can maintain value as Britain struggles, you could see a sustained upward trend for EUR.  

A EURGBP trading strategy

Timing

The best time to trade this pair is during European trading hours–07:00 – 16:00 GMT. The high trade volume provides liquidity to the market.

Pay attention to interest rates. When the Eurozone raises rates, the Euro tends to rise in value. This can mean EURGBP rises in value. However, also watch Britain's rates. If they rise, the EURGBP pair will lose value because the difference in value between the two currencies will shrink. 

Trade reversal patterns

Study candlestick trading to tell when an uptrend or downtrend in price is about to reverse. Let's look at the two types of reversals.

Bottoms

This is how a bottom looks. Prices could rise from here. 

Prices turned and started upward.  

Tops

All uptrends eventually reverse. Learn to spot peaks. 

Buyers gave out, and sellers started driving the price down. The more sellers, the lower the rate drops. See the candlestick trading guide to deepen your understanding of trends and reversals. 

Selection

It is wise to have some stable pairs in your Forex strategy. You can choose pairs that are experiencing less volatility than EURGBP and give yourself a better chance at success when starting out. 

Some to consider:

• EUR/USD (euro/US dollar)
• GBPUSD–British pound/U.S. dollar
• USDCNY–US dollar/Chinese renminbi
• USDCHF–U.S. dollar/Swiss franc
• USDHKD–US dollar/Hong Kong dollar
• AUDUSD–Australian dollar/U.S. dollar
• USDJPY–U.S. dollar/Japanese Yen

Examine the charts on these and make sure you understand what influences them. These do not always go up, but they do have resilient economies behind them.

Management

Only put 1-2% of your trading money into any one trade. That way, if the trade goes against you, your losses will not eat up your capital. Live to fight another day.  

Be careful when using leverage. "Leverage" is a loan the trading platform makes to you so you can invest. It can increase your investing power, but you do owe the money back. If your trade loses money, you must also repay the loan. You could lose more money than you invested.

Use stop-loss orders. This kind of order is an automatic sell order that triggers when a price drop hits a level you indicate. You will limit your losses this way. 

Consider using limit-buy orders. This type of order indicates the highest price you are willing to pay. It prevents your buy orders from executing too high. 

News

Be cautious when trading the news. A big announcement can cause you to act based on greed or fear. Let others fight it out and determine which way a currency will move. You are not going to miss out on much. 

Here is an example. On October 20, 2022, the prime minister of England resigned after only 44 days in office. Her economic policies had been a disaster, and the Pound lost value dramatically. Your first reaction might be that the Pound was going to slide further because the government was in chaos. But it didn't. Trading prices remained flat that day.

The Pound had already fallen so far that most who wanted out of it had already sold. Also, there was some optimism that a new prime minister would right the ship and get the economy going in a good direction again.

History of EURGBP

You can benefit from looking at how EURGBP has responded to significant market events. Let's look at some recessions and recoveries and how this pair responded.

The Euro is introduced

The EUR currency was used in financial transactions. EURGBP moved sideways as the new currency established its value on the world market and in relation to GBP.

The Great Recession

European countries borrowed money to keep their economies afloat. Generally, higher interest rates increase the value of a country's currency. Increased borrowing demand encouraged lenders to raise interest rates. This attracted foreign investors who could make money from the higher interest rates. The value of the Euro rose, so EURGBP rose.

The European debt crisis.

It became apparent Greece might default on its debt. 

Other possible debt defaults in Portugal, Italy, Ireland, and Spain caused concern, driving the price of EUR down.  There was concern that the euro would go out of existence. However, on July 26, 2012, Mario Draghi, President of the European Central Bank, gave a famous speech in which he promised to do "whatever it takes" to preserve the euro. That helped boost confidence and turn euro valuations around.

Brexit/European revival

As Europe began to recover from its debt crisis, Britain decided to leave the European Union. Investors saw Britain's economy as uncertain and shaky, while the Eurozone regained its economic status. EURGBP rose as demand for Euros rose and the Pound sank in value. 

Future predictions for EURGBP

Long-term predictions

It is reasonable to think that Britain will take its time recovering from its financial crisis. The question is how fast EUR will recover from the current near-recession. Remember, it is the spread between EUR and GBP that increases its value. Watch for EUR to rise in value while GBP stays where it is or sinks further. This will make EURGBP attractive. If both currencies drop, the spread doesn't change much, and EURGBP will remain flat or drop further.

Medium-term predictions

Things may get worse for the Pound before they get better. But EUR has also been in decline due to inflation and slowing growth. Keep in mind that Europe's borrowing sprees have led to crises in debt as countries realize they can't pay back what they bored. Also, Rate hikes by the European Central Bank have not stopped the decline. Look for some organic stability–not interventions–to see if there is a signal that the Eurozone is turning the corner and can increase GDP growth. 

The difference between trading and investing in EURGBP

Think of yourself as either a trader or an investor. 

Trading EURGBP

"Trading" is about short-term positions. You watch for the daily or weekly ups and downs and try to get in on them.

Short-term traders like EURGBP because it is volatile as the worldwide economic crisis and the change in leadership for Britain could cause confusion. But confusion can cause bigger spreads.  

Investing in EUR and/or GBP

"Investing" refers to holding a position for a year or more. However, you can use a shorter timeframe if market conditions warrant. Still, the idea is to watch long-term patterns.

EURGBP forms long trends, but they are choppy. Look at charts going back a year and more to get an idea of the recent history. Stay out during a long downtrend and watch for periods of economic recovery. That could give you an opportunity to buy as a new uptrend begins. 

5 Tips for Successful use of EURGBP

1. If both EUR and CGBP rise or fall about the same, there will be fluctuations in the chart, but remember, it is the price spread you are interested in. If they move in tandem, you will see a continued drop in EURGBP, but not a dramatic fall. Watch to see when one of them changes more than the other.
2. Watch the world economy. Europe is too large to make an economic turnaround on its own. It needs trading partners to buy products and services. Broaden your research to see if other countries are recovering. A rising tide lifts all boats.
3. Interventions may slow the drop in EUR value but won't send it upward. It's like going downhill with the brakes on. Wait for a rising GDP in Europe.
4. Change your expectations for liquidity. Europe and Great Britain have been reliable economies in the past, so forex traders found the pair attractive. This confidence is fading. Don't assume you will be able to find a ready buyer at all times.
5. Watch technical charts for a signal that EURGBP has bottomed. Let the chart tell you what to do. Use your waiting time to study.  

What are the risks with EURGBP?

Do not get the impression that EURGBP is predictable. It can surprise you. This pair does have long trends, but news about a recession, inflation, rising interest rates, and political shakeups should change your expectations. One major concern is global contagion if Britain's economy collapses. Other "safe" countries may follow. Finally, Russia shut down the gas supply to Europe, which could be hard to overcome.

EURGBP: General terminology

Exchange Rate - The value of a currency in the forex market as compared to another currency.  

Bid/Ask Spread, or Spread - The spread is the difference between the exchange rate for EUR and GBP.

Risk Management - Protecting yourself against losses. Use stop-loss orders and limit-buy orders, and watch the chart daily or at least weekly. 

FOMO - Fear of missing out. This urge has ruined many a trader. You see prices rise and jump in, not knowing why they are rising. Do your homework.

Stop-loss Order - A sell order that triggers automatically when the price drops to a level you specify. 

Limit-Buy Order - The highest price you agree to pay for EURGBP. 

Leverage - A loan from a broker you can use to buy more EURGBP.

Priced In - Current news may already be "priced in," meaning the market anticipated what would happen and bought or sold accordingly. Example: When inflation rises over the long term, an announcement that it rises on a particular day may not affect the markets because traders expected it.

Gapping - This is a jump in prices without any intervening trades. Gaps do occur in EURGBP. The direction of the gap can be up or down. You need a candlestick chart to see gaps.

Reversal - A reversal means the previous trend is about to turn and go in the other direction.

Conclusion

EURGBP can make you money if you track the interest rates of each economy, plus any interventions or changes in economic policy. However, these are just the basics. You need to anticipate how any event will affect the Eurozone disproportionately to Britain. You are trading based on demand.

What will make more traders want EURGBP? What will make more traders want EUR than GBP? The more demand, the higher the price of the pair. Get used to thinking about spreads and demand, and you will be well on your way to trading this pair successfully. 

Frequently Asked Questions (FAQs)

Is EURGBP volatile?

EURGBP can be quite volatile because of economic instability. Turmoil in Britain has caused a dramatic drop in the Pound's value. As a result, EURGBP rose in value. You could buy a lot more Euros with fewer Pounds. Anticipate more volatility in the downward direction if the Pound begins to recover. Volatility will be the name of the game for this pair for the foreseeable future. 

What is the nickname for EURGBP?

Traders call it 'Chunnel." The name refers to the English Channel tunnel. Because it connects England to the Eurozone by way of France, it symbolizes the close interdependence of the Euro and the Pound. Britain collapsing could cause the Euro to struggle. 

How much is traded in EURGBP a day?

There are 312,179 trades, but this could rise dramatically if EUR starts increasing in value. If both currencies continue to struggle, expect the average to drop. 

Is the EURO a safe currency?

No. It is dropping in value and until it turns around, it is not wise to consider it safe.

Is the Euro correlated with gold?

It is negatively correlated. Investors use gold to protect against currency devaluations. So when gold is rising, the Euro is falling. 

Does EURGBP have a big spread when trading?

There was a time when the spreads were considered moderate. They have become larger in tumultuous times. 

Which is the safer currency, EUR or GBP?

Neither is "safe." EUR is doing better than GBP, but no currency is 100% reliable, and the times are uncertain. Either would be a highly speculative trade right now. 

Should I invest in EUR or GBP?

What goes down must come up. Most of the time. Make sure a new uptrend has started in these currencies before you jump on board. A turnaround probably won't occur in a day, so you will have time to identify a sustained trend before you invest.

Should I trade EURGBP?

If you have time to monitor your trades daily, you could make money on some short-term fluctuations. It is hard to predict long-term trends for this pair right now.