Why Is EUR/USD the Most Widely Traded Pair in The World?

by Carter Toni

The forex market is a huge global entity and one that comprises more than 170 different currencies.

However, it’s the seven major pairs (each of which includes the US Dollar) that dominate the marketplace, accounting for 68% of daily forex trades. The greenback itself is on one side of 88% of all forex trades, which is understandable given its widespread acceptance and status as the world’s primary reserve currency.

One particularly dominant pairing in the EUR/USD, but why is this so popular as how is it performing in the current marketplace?

Why is the EUR/USD So Popular?

Currently, the EUR/USD pair is considered to be the most popular and widely traded currency asset in the marketplace, accounting for more than 24% of daily transactions.

There are several reasons for this, with the main factor being the sheer size and scope of the economies that underpin their respective currencies.

More specifically, the US and the EU share 42.4% and 30.7% of the entire global GDP in nominal and PPP terms, respectively, making both the dollar and the Euro incredibly influential in real terms.

As a direct result of this, this pairing is highly liquid, which means that it can be bought, sold and exchanged with relative ease by investors. This is extremely beneficial to traders, who can operate with genuine peace of mind while profiting from real-time price shifts in the marketplace.

Due to these factors, the EUR/USD is also nowhere near as volatile as alternative major or minor currencies, except in certain market conditions.

This makes the pairing particularly suitable and appealing from the perspective of novice or risk-averse investors, who may be looking to back assets that are consistent and trade within familiar price ranges.

How has the Pairing Performed Through 2021?

The relative consistency has been borne out over the course of the last year, despite an uncertain economic climate and the disruption caused by the coronavirus pandemic.

To this end, the pair has traded between a low of 1.16287 on September 25th, 2020 to a peak of 1.23280 on January 6, 2021.

However, it has seen some nominal volatility through this year to date, slumping from its January peak to 1.17215 by March 31st before rebounding once again to 1.22480 just eight weeks later.

While the pairing has depreciated further since the end of May as the greenback has strengthened against the backdrop of America’s successful Covid-19 vaccine rollout, the global economy remains precariously poised while the EUR/USD has inched higher towards the end of Q3.

Most recently, forex trading enthusiasts saw the pair mostly consolidate, before rising incrementally during the Asian session to 1.1734 (an increase of 0.08%).

This coincided with a decline in the US Dollar Index (which tracks the performance of the greenback against six major currencies), so there’s some enthusiasm that the EUR/USD will continue its tentative recovery in the near-term.

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