Should You Invest In EUR/GBP?

The EUR/GBP is a popular currency pair, and one that has a very distinctive relationship. Prior to the UK referendum on continued membership in the EU, held in June of 2016, these currencies were closely related and affected similarly by financial events in Europe and the world. However, since the Brexit vote of June 2016, the two currencies are parts of two separate economies, and the relationship between the two has changed. The GBP has taken a hit, weakening against the Euro overall. And yet, since the two economies are still close to one another, the changes in rates between them are relatively smaller compared to other pairs. When investing in this pair, a trader can open a short or long position. When opening a long position, the trader hopes that the ratio between the currencies will shift in favor of the EUR, so 1 EUR will be worth more in GBP, thus generating a profit when selling the EUR. However, shifts in the currency market are measured in very small units known as pips. A pip is the smallest unit of movement, to the fourth decimal place, meaning each pip equals 0.01%. Since traders wish to capitalize even on these small movements, a lot of capital is required to profit from such a shift. Therefore, investment platforms offer leveraged trading, providing traders with credit at a fixed ratio. Since leveraging works both ways, losses are also leveraged, and when a trade fails, accounts can be depleted rapidly. While the Brexit vote occurred in mid-2016, the UK will officially break away from the EU in 2018. This two-year period should increase volatility between the two currencies, since many trade-agreements are now being renegotiated, and the monetary policies of the UK and members of the EU could carry more weight.