Guide to Trading the Euro Following ECB Announcement

Jul 06, 2012, 04:21 ET from City Index

LONDON, July 6, 2012 /PRNewswire/ --

Yesterday we saw the European Central Bank (ECB) announce an expected 25 basis point cut to its interest rate. Following the announcement, how do you plan to trade the euro?

In the guide below, we look at the news following the announcement and consider financial spread betting as an alternative to more traditional trading and how it can benefit you.

ECB Cuts Interest Rate

Yesterday afternoon [July 5], market expectations were fulfilled when the European Central Bank announced a cut to 0.75% in its main interest rate.

However, whilst this caused little surprise, the markets were surprised to learn that the rate on its deposit facility was being cut to zero.

A culmination of the announcement not only by the ECB, but also by the Bank of England and the People's Bank of China caused a ripple effect in the market - specifically affecting the price of the euro.

How Does this Affect the Euro?

In the wake of the announcements on Thursday, the euro fell sharply.

Prior to the ECB statement, analysts at Morgan Stanley had stated: "We do not believe that the anticipated central action will be enough to restore confidence in broader risk appetite generally, or the euro specifically."

With this in mind, how do you plan to trade the euro when it is depreciating?

Spread Betting on a Falling Market

Through financial spread betting provider City Index, you can take a position on a falling market with the potential to profit.

As an alternative to traditional trading, spread betting allows you to go long and buy in a market you expect to rise - or go short and sell in a market you expect to fall.

In the event, let's say you expect the euro to depreciate against the US dollar and decide to go short and sell the euro against the US dollar. If the market moved in favour of your position (ie if the euro fell against the US dollar), you would profit with every pip that the euro depreciated.

However, if the market moved against your position (ie the euro rose against the US dollar) - you would incur a loss for every pip the euro appreciated (rose) against the US dollar.

Tip: As a leveraged product you can incur losses greater than your initial deposit.

Start Financial Spread Betting

To start spread betting across a range of trading platforms - including mobile and tablets - you can apply for a spread betting account with City Index through their website: http:http://www.cityindex.co.uk

Read More Spread Betting Tips

If you found this article helpful, you may want to read more just like this. You can access a range of free spread betting tips, guides and articles through the City Index website.


About City Index:

Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.

As a group, we transact in excess of 1.5 million trades every month in over 50 countries. We provide access to a wide range of instruments including margined foreign exchange, CFDs and, in the UK, financial spread betting.

We constantly look to improve the performance of our platforms and expand our range of services. The result is our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer support. Visit http://www.cityindex.co.uk/ for details.

Spread betting, CFD trading and FX are leveraged products which can result in losses greater than your initial deposit. Ensure you fully understand the risks.

SOURCE City Index