Trading EUR/SGD

The EUR/SGD is an exotic forex pair with an interesting history. While the Euro is the official currency of 19 member states of the European Union, the Singapore Dollar is controlled by the country’s central bank and is one of the most stable currencies in the world.

In this tutorial, we review the advantages and disadvantages of trading EUR/SGD, investing strategies, plus key events that influence the forex pair’s exchange rate. We have also compiled a list of the best EUR/SGD brokers below.

Live Chart

EURSGD Chart by TradingView

Note, the EUR/SGD live chart shows the current Euro to SGD conversion rate.

EUR/SGD Explained

EUR/SGD is defined as exotic because it is a large currency (the Euro) paired with the currency of a smaller economy (Singapore). The exchange rate represents how much of the quote currency, the Singapore Dollar, is needed to get one unit of the base currency, the Euro.

Another way to put it is the amount of Singapore Dollars that you would receive for a conversion of 1 Euro to SGD. SGD to EUR would show the inverse.

Graphs and exchange rate tools for EUR/SGD can be found on currency converter websites such as xe.com. Simpler websites such as Coinmill also provide current conversion rates for 1 EUR into SGD.

The EUR/SGD pair set an all-time high of 2.23 in December 2004 and an all-time low of 1.43 in April 2015.

Why Trade EUR/SGD?

There are several reasons why investing in EUR/SGD is a good option:

• Potential profits – While the Singapore Dollar is a stable currency with a long-term growth trend, the Euro is more volatile, so the EUR/SGD offers interesting dynamics for traders with a decent risk appetite.
• Economy knowledge – As this currency pair is often analyzed using fundamental analysis (evaluating external events and influences) rather than technical analysis (identifying trends and patterns based on historical data), a deep macroeconomic understanding of the EU and Singapore could provide a trading advantage. Because of this, exotic pairs like EUR vs.SGD can sometimes be easier to forecast than major forex pairs.
• Trading costs – Generally, forex has low trading costs compared with other instruments such as stocks and shares. Most brokers don’t charge a commission for investing in forex, making their money from spreads instead.

With that said, spreads widen and costs increase during periods of unexpected volatility.

Risks Of Trading EUR/SGD

There are also disadvantages to investing in EUR/SGD:

• Technical analysis – Because there isn’t a direct correlation between the two currencies, EUR vs.SGD predictions are difficult and technical analysis is often complicated.
• Availability of information – There is less information available about the Singapore Dollar as it is not a major currency, making the EUR to SGD rate more difficult to forecast.
• Liquidity – EUR/SGD has less liquidity than major forex pairs such as EUR/USD. Liquidity can be translated as buying power.
• Wider spreads – Because of the reduced liquidity, brokers tend to charge more for trading exotic pairs.

EUR/SGD Trading Strategy

Below are key factors to consider when trading EUR/SGD:

Forex Brokers

To invest in EUR/SGD, the first thing you will need to do is set up a trading account. It is important to select a good broker here, and there are several things to consider:

• Regulation – Where is the broker regulated, and what standards do they comply with? Find out if your funds are protected, for example, if the broker becomes insolvent.
• Platform – Brokers may offer their own proprietary platforms or license other platforms such as MetaTrader 4.

• Check platform reviews to ensure they meet your investing and live charting needs, including suitable indicators to enable Euro versus SGD trend analysis.
• Spreads, commission, and additional fees – Brokers will often make money from spreads on forex, the difference between the EUR/SGD buy and sell price. These spreads can be fixed or variable. Check if spreads are competitive and if any additional fees apply, such as account charges or commissions. Note, ECN accounts tend to offer ultra-low spreads.
• Demo account – Some firms offer a free demo account option. This is a great way to practice strategies with virtual funds before investing with a real account. Brokers often offer demo accounts that reflect the same environment as their live account, giving clients the opportunity to get familiar with the platform before depositing real funds.
• Withdrawal of money – Ensure you have easy access to funds. In particular, look out for long withdrawal times, minimum requirements, and fees.

For EUR/SGD trading in Singapore, among the most popular forex brokers are CMC, IG, and Oanda, all of whom are regulated by the Singapore Central Bank, MAS.

However, a maximum forex leverage of 1:50 is offered due to Singapore regulations, which isn’t as high as can be found elsewhere.

Due to the relative stability of currency in comparison with equities, leverage is often used to increase potential profits.However, traders should also be aware of the risks involved with using leverage, which can increase losses as well as profits.

Risk Management

Ensure you have a strategy for how much you’re willing to risk on each trade.It is advised that traders keep this low to reduce losses; it is uncommon for successful investors, for example, to risk more than 2% of their total capital on a single trade.

Economic News

It is particularly important for the EUR/SGD FX pair that traders keep up to date with economic news.Many online resources offer regular updates for EUR/SGD, including Yahoo Finance, Google Finance, Channel News Asia, and the Financial Times.

Additionally, investors should be aware of when key financial reports are released to react accordingly.Refer to the rest of this article to understand specific factors that influence the Euro and Singapore Dollar and key dates to look out for.

EUR/SGD Timing

The best time of day to trade is generally considered to be 1 pm – 5 pm GMT, as this is when both the London and New York markets are open.These trading centers account for a huge proportion of forex trades, meaning that there is more liquidity in the market at this time.

This usually leads to tighter spreads, allowing for better pricing when investing.

When trading EUR/SGD, it’s important to consider forward rates. Although the “spot market” refers to investing “on the spot,” trades are actually executed on the settlement date, which is typically two business days after the agreement. As a result, most brokers roll positions forward and charge a swap fee or overnight interest rate. This can result in either a credit or debit, depending on the interest rates of the long and short currencies. Triple swap rates are often applied on Wednesdays to account for the weekend after the two business days. Traders should watch EUR/SGD forward points, which are added to or subtracted from the FX rate to account for this.

Volatility

An instrument’s volatility determines the potential profit or loss one could make. EUR/SGD is characterized by relatively minor fluctuations on charts and is more suited for medium-term trading strategies. The infrequent reporting from the Singapore Central Bank compared to other central banks also supports this strategy. Investors may want to examine the history of the Euro vs. SGD, including historical exchange rate data forecasts. 5-year and 10-year EUR/SGD charts are good for analysis.

Euro Background

This section examines the history of the Euro and key influences on its value to better understand how to forecast EUR/SGD. The Euro was established by the Maastricht Treaty in 1992, where the original 12 member states created an economic union and associated currency.

The Euro became the official currency of 19 out of 27 EU member states in 1999, forming the Eurozone.

Factors Influencing the Euro

Individual Country Economies

The economies of Germany, France, Italy, and Spain make up three-quarters of the Eurozone’s GDP, with Germany and France alone accounting for over 40%. To assess Euro performance, investors should keep a close eye on these countries’ GDP, production, and unemployment rates.

Inflation

Inflation is a crucial factor for all currencies, as high inflation usually leads to currency depreciation. In the Eurozone, the Consumer Price Index (CPI) is the primary measure of inflation. This indicator calculates the cost of a basket of goods and services that an average household is likely to purchase. Traders typically follow the Core CPI, which excludes energy and food prices, as they are more volatile and can distort the CPI.

Due to the monetary policies implemented during the pandemic, inflation rates have increased as European countries recover from Covid-19. This has resulted in a weaker EUR and decreased purchasing power for consumers.

Sentiment Reports

The monthly German ZEW Economic Sentiment report is one of the most widely followed reports.

Up to 300 financial experts are interviewed about their expectations of the economy for the next six months, including exchange rates.From this, a single indicator is published, allowing for an easy-to-interpret outlook on the European economy, which is valuable when trading EUR/SGD.

Monetary Policy

The European Central Bank (ECB) has a large influence on the EUR, as it sets target interest rates and controls the supply of the Euro currency.Press conferences from the ECB often cause currency volatility, especially during the question period.With this in mind, review ECB announcements when online trading EUR/SGD.

GDP & Economic Growth

GDP and economic growth reports indicate the overall state of the Eurozone economy.GDP is a measure of the goods and services produced, so a high GDP is a positive sign for the Euro.As mentioned, Germany and France play the biggest role here.

Balance of Payments

The balance of payments for a country is made up of three accounts: current, financial, and capital.These provide a measure of its interaction with other countries, including income and trade.

A current account surplus means more exports than imports, which is positive for the currency.A current account deficit means the opposite.Again, it is worth focussing on the reports for Germany and France in particular.

Politics

The impact of politics on EUR to SGD has become especially relevant now.European Union politics and elections of key member states can have a large influence on the Euro.

Keep up to date with trade deals and countries entering and leaving the EU, for example, the UK and Brexit.

Another important example is the Ukraine-Russia war. Even though Ukraine is not part of the EU, the conflict had a deep impact on the EUR/SGD price – the EUR weakened in face of the SGD.

Singapore Dollar Background

Singapore is a politically stable country with a small yet strong economy that attracts investors. Since the first prime minister was elected in 1959, there has been only one ruling party, the People’s Action Party (PAP).

Singapore is highly dependent on exports, including electronics, pharmaceuticals, and chemicals. This means the exchange rate has a much stronger influence from inflation versus interest rates. The Central Bank controls inflation through the Singapore Dollar.

The country has undergone massive economic growth since the introduction of the exchange rate system in 1981, mainly driven by the manufacturing industry. This has meant Singapore has rapidly developed from a low-income to a high-income country, despite the mid-80s recession and Asian financial crisis.

What Influences The SGD?

Monetary Policy & Economic Growth

The Singapore Central Bank (MAS) conducts monetary policy through exchange rate setting rather than interest rates.

The Monetary Authority of Singapore (MAS) allows the Singapore Dollar to fluctuate against a basket of major trading partner currencies within a fixed band.

The weighting of each currency in the basket varies based on the volume of trade with that country and is updated periodically to reflect the latest data. The band offers flexibility to accommodate short-term fluctuations, and if the exchange rate falls outside the band, MAS will either buy or sell foreign exchange to guide it back into the band.

The objective is to promote price stability and generate economic growth, resulting in low volatility in the exchange rate. The standard deviation of the Singapore Dollar nominal effective exchange rate (S$NEER), a measure of variation, was 1.48% between Q1 81 and Q2 20, compared to 3.52% for the USD and 4.61% for JPY. As of mid-October 2021, the S$NEER has appreciated by 0.97%, and in April 2022, it has been recorded near the upper limit of the policy band.

The Singapore Dollar has experienced a long-term appreciation trend due to economic progress and high current account surpluses. This is a significant reason why many investors opt to sell EUR and buy SGD.

EUR/SGD Important Dates

Here are the essential dates to keep in mind when trading EUR/SGD, based on external factors that influence this forex pair.

MAS policy announcements are typically released in April and October each year, which is less frequent than central bank reporting. EUR/SGD is, therefore, better suited to longer-term trading strategies.

The Europe CPI report is released monthly, with flash estimates released at the end of the month and the official CPI released two weeks later.

The effects of the flash report often dilute the EUR/SGD exchange rate impact of the official report.

The Eurozone GDP report is released approximately two months after the end of each quarter. Analysts usually estimate GDP prior to this, though the release of the report still tends to have an impact on the Euro, especially when results are different from predictions.

The Singapore current account balance is released approximately two months after the end of each quarter. The Euro current account report is released monthly, usually during the second week of each month.

EUR/SGD Correlation

The Euro and Singapore Dollar aren’t highly correlated, as the EU is not one of Singapore’s top export destinations. However, traders should be aware of relationships with other currencies.

The EUR/SGD rate is highly positively correlated with EUR/USD. This means that when EUR/USD increases, the EUR to SGD exchange rate is also likely to increase. Plotting EUR/USD and EUR/SGD on a live chart shows this clearly. This is because Singapore is highly influenced by exports to the US.

The EUR against SGD is also positively correlated with EUR/JPY due to a trading agreement that has resulted in a high level of imports and exports between Singapore and Japan.

Final Word On Trading EUR/SGD

EUR/SGD is a forex pair that is difficult to predict using technical analysis and, for this reason, is more suited to experienced traders.

However, having a deep understanding of both economies and their influencing factors is valuable.

Though EUR/SGD has a long-term declining trend due to Singapore’s economic growth, the Euro volatility means profits are possible in the short term.

While the EUR/SGD 2023 outlook is more difficult due to the effects of the war in Ukraine and the recovery from Covid-19 has on both economies, this may open up opportunities for traders.

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