The EUR is administered by the EU Central Bank (ECB). Because of its status as a multinational regulatory bank, its remit is a little different than the US Fed, for example. The ECB is concerned solely with IRs and maintaining price stability in the Eurozone, while the Federal Reserve and most other nationwide central banking institutions also have to consider the results of their decisions on employment levels. This implies that the ECB has a rather more hawkish approach to IRs. This means that they generally tend to favor a rise in rates. They’ll put the IRs up faster than the FR would when costs rise, and are less sure to lower them when prices fall. This suggests that changes in something similar to the retail price index in Germany will not affect EUR rates and that the cost of the euro in the same way that the same situation in the States would affect the cost of the buck. Another point that is necessary to remember if you’re concerned in EUR trading is that although there are at present 27 member countries of the EU, only 16 of them are members of the EMU (the Eurozone). Another 5 use the euro but are not official EMU members. The others have opted not to join the Eurozone for their own reasons.
In particular, the UK is in the EU but does not use the EUR, while Switzerland is not a member of the EU at all . They have kept their own countrywide currencies, the British pound and the Swiss franc.
In addition, many nations in the ECU have a small GDP and aren’t great commercial forces. This suggests that the basic factors influencing the cost of the EUR depend principally on the business situation in just four western european countries. Those countries are Germany, France, Italy, and Spain in that order. Together, they produce 75% of the GDP of the Eurozone.
Hence the forex trader who is involved in euro trading wants to look out for major business announcements in those four countries while understanding the economic situation in other european countries will have a lot less of an impact on Euro trading.
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