Forex Trading: The mysterious strength of the Euro

The most frequently traded currency pair in the world is the EUR/USD pair. $4 trillion changes hands daily in forex trading and this currency pair attracts interest from investors from around the globe, all of whom are looking to take a position on the forex (FX) markets.

April 2012 has been an intriguing month for forex trading. It has seen a number of Eurozone problems appear and has seen existing ones get worse.

The Dutch government has resigned after failing to implement austerity measures, while the French presidency has been forced into a run-off in May, with a left-wing socialist the front runner in the polls. The UK, not a part of the single currency, but very much integrated into Europe, has slipped into a double-dip recession based on preliminary GDP reports. Spanish 10-year bonds have flirted with the dreaded 6% mark throughout the month, while big question marks remain over the stability of the Greek, Italian and Portuguese economies.

Yet despite all of this doom and gloom, the Euro has, for the majority of April 2012, held its position against the USD, bemusing many who are involved in forex trading. There are a lot of theories as to why this might be the case, but a general consensus on the issue has so far been lacking.

*A chart illustrating the EUR/USD movement from April 02 2012 to April 26 2012

Some economists believe that the bad news in the Eurozone has been offset by problems in the US. The disappointing employment figures for the US, released on April 6, would potentially support that theory, as would suggestions that the chairman of the Federal Reserve, Ben Bernanke, has hinted at another round of QE if things got worse for the USD.

Other economists point to the measures being taken by a number of European governments to counter the threat of a further economic downturn being widely successful, which would strengthen the EUR. Governments have been looking to cut their balance sheets and commit to putting their assets back into the Eurozone, along with selling their foreign assets. Meanwhile, the austerity work undertaken by Ireland was recently praised by the ECB and the IMF.

Whether you’re in the bull pen or the bear pit for the EUR/USD pair, you can find the latest in-depth analysis on FX trading at IG Markets. They are a CFD and forex provider that offer twice daily market analysis and a dedicated forex focus, to help you make sense of any forex trading changes. IG Markets offers tight spreads on all of their FX pairs, starting at just 0.8 pips.

Please consider the Product Disclosure Statement available from IG Markets. CFDs and forex trading can result in losses that exceed your initial deposit and you do not own or have any interest in the underlying asset. This information does not constitute as financial advice.

Author's Bio: 

James Paxton is a financial writer with a passion for forex trading. He also has experiences in writing about the FX trade, as well as CFD trading and its applications to a variety of financial markets, including shares, stocks, commodities, bonds and more.