European Central Bank (ECB): Masterforex-V traders' view

European Central Bank through monitoring of Masterforex-V traders

Central bank rates in Forex trading

The size of discount rates in the Forex market for a trader is important when calculating swaps and for determining the sentiment of a currency pair in the long term. How can you make money with this information?

Strategy for trading interest rate differences

When making a transaction on the Forex market, a trader exchanges one currency pair for another. To sell the euro-dollar, the trader needs to borrow European currency from the broker for American, which is the deposit currency. The trader receives funds in eurozone currency on credit at 0.05% per annum. When buying dollars for euros, a deposit interest rate on American currency is calculated in the amount of 0.375% per annum. The difference between the deposit and credit interest rates is 0.325% and is a positive swap. It is credited daily to open positions that the trader holds until the next calendar day.

Swap can be either positive or negative. There is no need to calculate it manually, since its value is indicated in the corresponding table on the website of any Forex broker. A simple strategy for trading interest rate differences is to open a position in the direction of a positive swap on a currency pair on one account and an opposite (hedging) position in the other direction, opened on the same currency pair on a swap-free account with another broker. Of course, you can’t count on big earnings with this approach, but the trading system is good for its simplicity.

Loans from commercial banks in the eurozone

Mortgage loans in Europe are considered a profitable investment tool due to favorable conditions and low rates . The easiest way to get such a loan is in Spain, Germany, France. The rate in each country is set separately, but it is always linked to the European interbank lending rate Euribor.

Foreigners have access to mortgage loans in Europe, but with an increased rate and an expanded package of necessary documentation. But the rate is fixed (2-2.5%). Banks are especially loyal to employees of European companies who have been working there for at least 3 years. The loan term is usually up to 20 years; in any case, the borrower will have to confirm his own solvency.

The main advantage of deposits in European banks is reliability. The EU deposit guarantee system promises a return of 200,000 euros. In some countries, the entire deposit will be returned, regardless of the amount. But such deposits also have a significant advantage - a low rate, not exceeding 1-2%.

Story

After the end of World War II, the unification of Europe began. Structuring was activated and the formation of a single market space began. In the period from 1947 to 1957, the period of integration of the states of the region was successfully completed with the parallel emergence of the European Payments Union. In 1957, the largest European states united into the European Economic Community. In 1979, fiat money - ECU - was introduced into the EEC for settlements that were immediately linked to a basket of European currencies. The memorandum on the formation of the European Monetary Area and the ECB was signed in 1988. LLC CB "Central European Bank" appeared after the signing of the international treaty on the creation of the EU in 1992 in Maachtricht, as well as after the formation of the European Monetary Institute, whose responsibilities included preparing for the transition to a single currency - the euro.

The best and largest banks in the European Union

The most reliable European banks are:

• Barclays is a large financial conglomerate with a large number of representative offices in Europe, the USA, and Asia. It is one of the globally systemically important banks. The bank works with investments, advises companies on acquisitions and mergers, opens private and corporate accounts, debit and credit cards. Website: home.barclays/
• HSBC is one of the world's largest financial conglomerates, with more than 3,900 branches in different countries. Offers a wide range of services to companies and private clients. Actively works in financial markets. It occupies a leading position in terms of assets and market capitalization. Website: www.hsbc.com/
• Deutsche Bank is Germany's largest conglomerate in terms of number of employees and total assets. It is one of the 30 most significant banks, owns commercial and mortgage, leasing and investment companies. It has representative offices in more than 70 countries. It is a major participant in the foreign exchange market and attaches great importance to investment activities and the issue of its own securities. Website: www.deutsche-bank.de/pk.html

Credit ratings from Standard Poor's and Moody's are assigned separately to each eurozone country.

Germany's credit rating from Standard Poor's

Germany's credit rating from Standard Poor's is AAA, like Australia, Canada, Switzerland, Denmark, Liechtenstein, Luxembourg, the Netherlands, Norway, Sweden, Singapore

• AAA is the maximum rating;
• Below AA are the UK, UAE, France.

The AAA rating is investment grade and means a very high ability to meet debt obligations.

Comparison of the 0% key rate of the European Central Bank with the Central Banks of other countries of the world

The table shows that the European Central Bank's key interest rate of 0% is higher than in Switzerland (-0.75%) and Japan (-0.1%), but lower than in the UK (0.75%).

What does the ECB do?

The Central European Bank simultaneously performs several dominant functions:

• Development and implementation of monetary policy in the euro area.
• Providing, developing and managing exchange reserves of countries from the euro area of ​​an official nature.
• Euro issue.
• Setting interest rates.
• Ensuring price stability in the European zone.

The ECB's indicators are the consumer price index for consumers throughout the EU and the size of the money supply, the growth of which during the year should not exceed 4.5%.