Financial Topics

The History and the Future of the Euro

The Euro is the second-most used currency in the world after the US dollar. This is because of the advancement of the EU economy and the fact that it is the second-biggest economy in the world after the United States. Because of this, the EUR/USD pair is the most widely traded and the most liquid in the world. Therefore, as a trader, having a good understanding about the Euro is a good thing.

The European Union was created after the end of the Second World War. Before that, the rivalry between the countries that comprise the EU was always rising leading to many wars. To solve the issue, the then European leaders decided to create a united front. The original members of the union were Belgium, France, Italy, Germany, Luxembourg, and Netherlands.

In the 1960s, the member states saw increased economic growth helped by the fact that the countries removed tariffs and non-tariff barriers on trade. They also started to tackle issues like food production together. This progress led to more countries like the UK, Ireland, and Denmark joining the union. At this period, the rightwing dictatorships in Europe came to an end after the overthrow of Salazar regime in Portugal.

In the 1980s, Greece became the 10th member of the union. It was followed by Spain and Portugal. In the 90s, the collapse of communism led more members like Austria, Finland, and Sweden to join the union. In the early 2000s, the Euro was created to be the single currency for the region. This attracted more countries to join the EU. The chart below shows the performance of the EUR/USD pair since inception.

Proponents of the European Union believe that the union is necessary to enhance peace in Europe. They also argue that the union has placed members of smaller countries at the negotiation table in world matters. They also argue that the union is the best way to deal with the United States.

Opponents of the union argue that it is a dysfunctional body that does not do what it was intended. First, they argue that independent countries cannot negotiate trade deals. Instead, the deals must be negotiated through the European Union. Second, they argue that the union threatens the sovereignty of countries. For example, during the migration crisis, countries were required to take a certain number of migrants. Third, the union is accused of perpetuating the culture of increased overregulation. This regulation has led to a sluggish growth.  Fourth, many people argue that the EU has existed to make Germany and France more powerful. In fact, the two countries are the biggest in the region and have the power to veto most of the bills. Fifth, they argue that most of the decisions are made by unelected bureaucrats in Brussels.

These are a few reasons why the United Kingdom decided to leave the union, and there are chances that other countries will follow suit. This means the value of the Euro could swing up or down, due to uncertainty about the future of the block, which in turn means potential opportunities for traders to profit in the currency markets.