Trading EURGBP

EURGBP trading involves speculating on the exchange rate between the British pound and Euro, which is an extremely popular foreign exchange market. The pair demonstrates high levels of liquidity, relatively low volatility and tight spreads, helping make EURGBP trading the currency pair with the fourth-largest trade volume globally. This article discusses the history of the two currencies, the main impacting factors and some of the top brokers.

GBP/EUR Exchange Rate History

Whilst the British Pound is one of the oldest established currencies in existence, with a history beginning around 775 AD, the Euro only came into existence at the turn of the 21st Century, in 1999. Ever since, the GBP/EUR historical exchange rate has fluctuated along with major political and economic events.

Despite the pound’s initial high of €1.752, the 2008 Financial Crisis caused its value to plummet to its all-time low of €1.02. A period of relative stability followed, periodically interrupted by the fallout of the Eurozone debt issues, before the Brexit Referendum result of 2016 caused the value of the Pound to tumble, including a single-day fall of 6%. EURGBP trading has since suffered volatility in line with Brexit negotiation developments and the global disruption of Covid-19.

Yet, GBP/EUR remains a relatively stable currency pair compared to many other minor forex pairs and therefore with more manageable risks.

EURGBP Live Forex Chart

EURGBP Chart by TradingView

Why Trade GBP/EUR?

The EURGBP trading relationship exists between two of the largest economies in the world – the United Kingdom (UK) and the European Union (EU). In fact, the GBP/EUR forex pair is among the four most commonly traded currencies worldwide. This high trade volume, allied with the asset’s high liquidity, means that trades have tight spreads – the difference between the bid price and ask prices – with minimal slippage.

Moreover, GBP/EUR is one of the most well-known cross-currency pairs. This means that the currencies are traded directly, without the need to be traded into US dollars (USD) in the interim. Not only does this prevent the spread risk of multiple transactions, but it protects trades against any volatility with the US dollar.

GBPEUR Trading Example

Every EURGBP trading session will have an opening exchange rate, for example, 1.4570.

If a trader anticipates a favourable price fluctuation, such as a strengthening of the pound against the euro, they would exchange some EUR for GBP.

The gain or loss at the close of the trade is determined by pip (point in percentage) point movements.

A pip point usually refers to the fourth figure after the decimal point, although it can vary by currency.

The value of pip point movements is usually calculated using the following formula:

(pip size / exchange rate) x position size

So, if we consider our EURGBP trading position with a market price of 1.4570 and a position size of £20,000, we can calculate our pip point movement value: (0.0001 / 1.4570) x 20,000 = £1.3727.

This means that with each pip of movement, your trade would gain or lose £1.3727.

Let’s consider the following hypothetical scenarios:

  • At the trade close, the exchange value has moved to 1.4590 – an increase of 20 pips.To calculate the trades gain/loss, you need to multiply the pip movement by the pip value – in this case, 20 x £1.3727 = £27.45 gain.
  • Unfortunately, the value has dropped to 1.4520 – a decrease of 50 pips.In this case, your loss would follow the same calculation, 50 x £1.3727 = £68.64.

Forex currency pairings are frequently traded on margin, large quantities of currency can be traded so the potential to make large profits or losses is significant.

What Factors Affect The GBP/EUR Exchange Rate?

The EURGBP trading pair is a relatively stable one, with fluctuations in exchange rates likely to be small.

However, like all currency pairs, there are a variety of economic and political factors that affect the exchange rate:

Economic Announcements

Monetary policy updates – the setting of interest rates, inflation management and money supply – typically have a short-term influence on the EURGBP trading exchange rate. The monetary policies of the pound and euro are governed by the Bank of England (BoE) and European Central Bank (ECB), respectively. Both institutions periodically release reports and deliver timetabled announcements so that traders can pre-emptively speculate on the currency’s pair’s price direction following these news releases.

Political Events

The 2016 Brexit vote and the subsequent trade and exit negotiations have caused increased volatility in GBP/EUR forex markets in recent years. However, that can also present opportunities for quick thinking day traders. Major political events such as elections, trade announcements or, more recently, Covid-19 policies can all affect GBP/EUR forex rates.

Correlated Currency Pairs

Other currency pairs, for example, GBP/USD, can be positively correlated (they move in the same direction) or negatively correlated (they move in the opposite direction) with GBP/EUR price changes. Therefore, traders can often observe trends and movements in the markets of correlated currency pairs to give them an indication of EURGBP trading price movements.

Many traders also use correlated currency pairs as a hedging strategy.

When To Trade GBP/EUR

Although GBP/EUR can technically be traded 24/5, it is not advisable to do so. For forex trading to be effective, the market requires activity and liquidity – put simply, the market needs to be busy. Peak trading for the GBP/EUR pair centres around the European trading session, which takes place from 07:00 – 16:00 (GMT).

Final Word On EURGBP Trading

EURGBP trading is the fourth most popular forex instrument in the world, for good reason. High levels of liquidity result in tight spreads, which, combined with manageable volatility, makes GBP/EUR an attractive currency pairing. Moreover, its close correlation with other major currency pairs allows for effective hedging strategies to be employed.

However, traders must analyse GBP/EUR market trends using exchange rate charts and projections like TradingView, as well as paying close attention to scheduled and unexpected economic and political events when making trading decisions. With forex trading, it is as much about when you trade as what you trade, so keep within European trading session hours for the best GBP/EUR spreads.

Brexit may have strained the relationship between the UK and Europe, but the EURGBP trading relationship remains strong.


Which Factors Affect the GBP/EUR Exchange Rate?

There is a multitude of factors that affect forex pair exchange rates.

However, the common ones to be aware of as a day trader are economic announcements, such as interest rate changes or GDP figures, and political events, such as post-Brexit trade deals. Early trends of correlated currency pairs such as GBP/USD can also affect exchange rates.

When is the best time to trade EUR/GBP?

Typically, European trading hours (07:00 – 16:00 GMT) are the best time for EURGBP trading. The high trade volume provides liquidity to the market, helping to reduce spread size. EURGBP trading outside these hours usually carries higher volatility with wider spreads, so these periods can put your capital at greater risk.

What is the best EURGBP trading strategy?

There are many strategies employed by GBP/EUR forex traders, such as swing trading, scalping, hedging or using expert advisors. Strategies will differ for each trader’s needs – scalping is better suited for regular traders whereas swing trading is better as a medium-term strategy – and traders should consider that not all brokers allow every strategy.