The Euro is in a strong position against the US Dollar, its third day of a rally in a row. The EUR/USD currency pair constitutes the most traded currency pair in the world. Sentiment has changed quite a bit recently, shifting dramatically in favor of the Euro and expressing conviction that it could win. Investors are moving towards a new currency, leaving the Greenback behind. As such, EUR/USD has blasted through the critical 1.1300 level, a sign of robust bullish momentum continuing to build across the FX market.
Notably, this increase in value is not a small one. The EUR/USD currency pair is the most traded pair in the world, accounting for approximately 30% of all foreign exchange transactions globally. It has a daily turnover of more than $2.2 trillion on average. This enormous number is just indicative of the supremacy of the euro in global currency trading. Indeed, the EUR/USD pair represented on average 31% of all transactions in 2022, highlighting its overwhelming success as the most transacted currency pair.
The Dynamics of EUR/USD Trading
The EUR/USD pair doesn’t just take first place in transaction volume. It greatly influences global currency trading trends. That’s because you track EUR/USD very carefully. These include EUR/JPY (4% of transactions), EUR/GBP (3%) and EUR/AUD (2%). The Euro is used as the primary currency and most popular currency in 19 Eurozone European Union member countries. This vigorous uptake further strengthens its competitive standing.
The Euro itself is the second most traded currency in the world, after the US Dollar. This status makes it especially appealing to investors who are looking for stability and growth potential. The Euro has proven incredibly magnetic to global investors hungry for yield. What makes them different from other currencies is their relatively high interest rates.
Recent Trends and Market Influences
During the last few trading sessions, the EUR/USD pair has shown extraordinary strength and fortitude. It had advanced higher on five of the past seven consecutive days, only declining on two days. After rebounding off its 50-day EMA around 1.1100, the pair picked up a lot of momentum on Wednesday. The price broke sharply above the important 1.1300 resistance level, drawing an overwhelming amount of bullish buying pressure. This technical achievement is the result of a groundbreaking turn in market fundamentals.
Local market analysts are calling it a sign of recovery in the market. They think this is because investors are increasingly unwilling to hold the US Dollar, which is facing upward pressure. Rising inflation and the reaction of the Federal Reserve in raising interest rates are sending strong reverberations through our economy. Consequently, market players are shifting their positioning, with this creating fresh bullish sentiment in the Euro. Supportive financial conditions in Europe are powering EUR/USD’s upside momentum. Tellingly, at the same time, investor sentiment is increasingly turning against the Dollar, pouring more fuel on this fire.
Factors Driving Euro’s Attractiveness
There are a couple reasons why the Euro has become an increasingly alluring safe haven for global investors. Similarly, high interest rates in the Eurozone attract the attention of investors. Some in the private asset management world have come to view it as a great option for pursuing higher yields on their investments. This phenomenon typically creates additional demand for Euro-denominated assets, helping to prop its value against the Dollar even more.
Further, assuming that market actors expect ongoing economic expansion in the Eurozone, confidence in the currency will increase. European leaders show such a capacity for proactive fiscal policy in face of economic challenges. This improves investor sentiment and provides a strong setting for capital inflow into Euro assets.