Forex Trading and European Bond Profits

According to most recent news reports the Euro Zone promises to ease up on restrictions for receiving bailouts to banks and nations. Nevertheless unemployment is still high and countries are suffering high interest rates in order to finance their debts. For the investor and for the Forex trader this situation may offer profits. The combination of Forex trading and European bond profits has certain similarities to the Yen carry trade, but in reverse. The point is that if the Euro Zone manages to come through the current debt crisis anyone holding seven percent Spanish bonds or twenty-six percent Greek bonds will prosper. As the economies of the Euro Zone right themselves and stave off an impending Greek bankruptcy , for example, interest rates will fall and the market value of the current bonds may be multiples of their base values. The other fact is that in order to get through the current debt dilemma the Euro Zone may end up devaluing the Euro, at least for the time being. Forex trading and European bond profits will require timing.

Are Things as Bad as They Can Get?

The best time to buy Euros will be when the Euro is at its weakest against other currencies, after another Euro Zone economic contraction . The best time to invest in Forex trading and European bond profits will be just before interest rates start to fall. In each case timing is the key to maximum profits. On the other hand those who wait for exactly the right time to pull the trigger on a trade or investment often end up jumping in too soon or too late. So long as the Euro is weak versus the USD, for example, and interest rates are at historic highs, the Forex trading and European bond profits scenario could work. Remember, however, that getting in is only half of the story. Investors will need to set an interest rate target at which they plan to sell their bonds and an exchange rate at which they plan to trade out of the Euro.

Profiting from Volatility, Market and Social

There is a lot of social and political unrest in Europe at the current time. Traders working a Forex trading and European bond profits scenario will want to keep track of not only market sentiment but voter sentiment as well. If the EU sticks to closely to an austerity approach there is the risk of a prolonged recession and one or more nations exiting from the EU. Then the issue for Forex traders will be the effects on the Euro of a smaller Euro Zone. If the EU decides upon more stimulus financed by printed money it will drive the Euro down, making Euro denominated investments cheaper to get into. Forex traders will be wise to follow both the news and technical charts of the Euro.