Economic profile - Eurozone

Economic profile - Eurozone
Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.

Wait. Are we going to look through all of these countries in just one profile? Well, of course as for all of them there is one name – Eurozone. That’s right. These are the 18 out of 28 countries which have adopted euro as their national currency. That means that they have common trade and monetary rules and goals so that the Union stays economically together. And the name for the currency is… euro!

Well, you probably already guessed that little fact.
Image

The economy.

Image
So. How is this possible. Because when I imagine a family of 16 people leaving under the same roof it always ends with murder! But is seems that Eurozone is a perfect family where everyone lives according to the main rules of the zone and as a result no one is getting hurt. Some of the core rules are:

  • The nation’s inflation rate must not exceed the average inflation of the three best performing (lowest inflation rates) states by more than 1.5%.
  • Their long-term interest rates must not exceed the average rates of these low-inflation states by more than 2%.
  • Exchange rates must stay within the range of the exchange rate mechanism for at least a couple of years.
  • Their government deficit must be less than 3% of their GDP.
If some country fails to meet these rules they are to pay a sizeable fine. And who is to watch whether these rules are fulfilled? Well the European Central Bank of course! ECB is an institution that controls price stability for the entire region. One can say that that is the exact goal for the ECB existence.

ECB also is to increase liquidity of euro by buying securities in exchange for euro and then selling these securities back. In general ECB is doing what every central bank around the world does just it does it for 18 countries at the same time.

The currency.

Image
Euro in its turn has been named the anti-dollar. EUR/USD is the most popular and the most liquid currency couple there is. It is most actively traded when London market is open – that means that its treading start 8:00 AM GMT and stops at 5:00 PM GMT.

Those who want to be in on the most active trading time of the couple are to adjust to this time.

The perfect counterpart for EUR/USD is USD/CHF as Swiss franc usually moves just the same as the greenback. Of course euro is mostly influenced by the greenback as well as economic state of each of Eurozone’s participants.

Trading EUR/USD means that you are going to be the witness for huge levels of liquidity as well as ar going to be able to enjoy very tight spreads.

Comments powered by CComment