Euro Currency (Part I)
12:49 AM
The European Union consists of fifteen member countries that include France, Germany, Greece, Ireland, Italy, Luxembourg, Austria, Belgium, Denmark, Finland, the Netherlands, Portugal, Spain, Sweden and the United Kingdom.
Out of these 15 countries, 12 common currency countries constitute the European Monetary Union (EMU). Except Denmark, Sweden and United Kingdom, all these above countries share the common currency Euro. These 12 countries share a single monetary policy dictated by the European Central Bank (ECB).
EMU has a highly developed and efficient fixed income, equity and the futures market. The EMU is the worlds second largest economic powerhouse after the United States. This makes EMU the second most attractive investment market for domestic and international investors.
In the past, the EMU had difficulty in attracting foreign direct investment or large capital inflows. The primary reason was the United States. Historically US assets have had solid returns. As a result, United States absorbs something like 70% of the total foreign savings.
However, the Euros importance is expected to increase with the introduction of the Euro and the EMU beginning to incorporate even more members in Eastern Europe. The capital flows to Europe is expected to increase.
With foreign central banks expected to diversify their Euro reserve holdings even further, demand for Euro is expected to continue rising. EMU is in fact a trade driven and a capital flow driven economy. Trade is very important to the national economies within EMU.
Unlike United States, EMU does not have large trade deficit or surplus. EU exports comprise almost 20% of the world trade. While EU accounts for only 17% of the world imports! Because of the size of the EMUs trade with the rest of the world, it has significant power in the international trade arena.
The formation of EU allows individual member countries to group as one entity and negotiates on an equal playing field with the United States. United States is the largest trading partner of EU. International clout is one of the primary reasons in the formation of EU.
Leading import sources for EU are China, Switzerland, United States, Japan and Russia. Leading export markets for EU are the United States, Japan, Poland, Switzerland and China.
Large numbers of EU based companies concentrate their research, design, innovation and marketing part of the activity in EU while outsourcing most of their manufacturing to Asia. EU is primarily a service oriented economy. Services account for more than 70% of the EU economy while manufacturing, mining and utilities account for around 20% of the EU economy.
It is important for most of the countries to hold large amounts of reserve currencies to reduce exchange rate risk and transaction costs. Most international trade transactions involve the British Pound, the Japanese Yen and the US Dollar.
Out of these 15 countries, 12 common currency countries constitute the European Monetary Union (EMU). Except Denmark, Sweden and United Kingdom, all these above countries share the common currency Euro. These 12 countries share a single monetary policy dictated by the European Central Bank (ECB).
EMU has a highly developed and efficient fixed income, equity and the futures market. The EMU is the worlds second largest economic powerhouse after the United States. This makes EMU the second most attractive investment market for domestic and international investors.
In the past, the EMU had difficulty in attracting foreign direct investment or large capital inflows. The primary reason was the United States. Historically US assets have had solid returns. As a result, United States absorbs something like 70% of the total foreign savings.
However, the Euros importance is expected to increase with the introduction of the Euro and the EMU beginning to incorporate even more members in Eastern Europe. The capital flows to Europe is expected to increase.
With foreign central banks expected to diversify their Euro reserve holdings even further, demand for Euro is expected to continue rising. EMU is in fact a trade driven and a capital flow driven economy. Trade is very important to the national economies within EMU.
Unlike United States, EMU does not have large trade deficit or surplus. EU exports comprise almost 20% of the world trade. While EU accounts for only 17% of the world imports! Because of the size of the EMUs trade with the rest of the world, it has significant power in the international trade arena.
The formation of EU allows individual member countries to group as one entity and negotiates on an equal playing field with the United States. United States is the largest trading partner of EU. International clout is one of the primary reasons in the formation of EU.
Leading import sources for EU are China, Switzerland, United States, Japan and Russia. Leading export markets for EU are the United States, Japan, Poland, Switzerland and China.
Large numbers of EU based companies concentrate their research, design, innovation and marketing part of the activity in EU while outsourcing most of their manufacturing to Asia. EU is primarily a service oriented economy. Services account for more than 70% of the EU economy while manufacturing, mining and utilities account for around 20% of the EU economy.
It is important for most of the countries to hold large amounts of reserve currencies to reduce exchange rate risk and transaction costs. Most international trade transactions involve the British Pound, the Japanese Yen and the US Dollar.
About the Author:
Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and currencies. Try Strignano's Forex Signals free. Discover a revolutionary Forex Robot Trading System!
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