Popular times to trade EUR/USD

European and US trading session overlap

Foreign exchange markets are open 24 hours a day, five days a week. You can even trade EUR/USD almost 24 hours a day, seven days a week using our weekend EUR/USD market.

However, the most popular times to trade EUR/USD (or any currency pair) is when it is most active – when the highest volume and number of transactions are taking place. When there is more volume, there is increased liquidity and higher volatility. These create larger moves in the price of EUR/USD and more trading opportunities.

Major FX pairs trade 24 hours, Monday to Friday. EUR/USD is open/active from 9pm Sunday all the way through until 10pm Friday UK time. However, it is the most active when the European and US trading sessions overlap between 1pm and 4pm UK time.

While volatility changes over time, the most volatile hours do not change too much. This means that the common time to trade the EUR/USD pair is in this 1pm to 4pm UK time window.¹

Economic data releases and central bank announcements in both the Eurozone and the United States impact the EUR/USD currency rate because they can generate increased volumes in trading. For the US, its main economic data releases are announced between 1pm and 4pm UK time, but there is an important exception. The Federal Reserve's announcement on interest rates is released at 7pm UK time, and this event typically creates an increase in volatility and trading activity.

Factors affecting the EUR/USD exchange rate

The EUR/USD exchange rate, like all foreign exchange trading, is impacted by macroeconomic, geopolitical and central bank factors.

Economic data

Economic data releases can impact the price of the EUR/USD currency pair, as they indicate potential strengths or weaknesses in the underlying economy. A strengthening economy usually leads to a higher currency, as it may influence growth or interest rate expectations. Inflation, balance of payments, employment and GDP are some of the important data releases. The Eurozone includes countries like Germany, France, Spain and Italy. Each country releases their economic data separately, so there are a large number of data points that need to be monitored.

Political events

Geopolitical events can impact the EUR/USD exchange rate. For example, when Russia invaded Ukraine, Europe was heavily reliant on Russian gas as a source of energy. The increased cost of power and energy across Europe, along with a growing concern that factories in Germany may be forced to shutter operations over the winter, led to a sharp sell-off in the EUR/USD rate because the US economy was less reliant on Russia for its energy supplies.

Elections and government policy decisions can have a large impact too. After an election, a new leader may implement an election manifesto that alters the outlook for the economy. For example, it could involve large public spending plans that require large-scale deficit financing or a sharp increase in taxation. Any policy that changes the outlook for growth can have a material impact on the level of its currency.

Central bank announcements

Decisions made by the two central banks – the Federal Reserve (Fed) and European Central Bank (ECB) – on interest rates and their accompanying statements are important drivers of the EUR/USD exchange rate, with interest rates being one of the most important influencers.

There is usually increased volume and volatility in the price of the EUR/USD exchange rate when the Fed or ECB announces an interest rate decision. A higher interest rate can attract more foreign capital to that currency, as it offers a higher return. The opposite is also true – a lower interest rate tends to see a decrease in the exchange rate.

Risk management strategies

It is important to carefully manage your risk when trading forex.

Research

You need to ensure that you build up knowledge about the factors that impact the EUR/USD exchange rate, including potential catalysts and upcoming events and data releases. You can use the IG Academy to help improve your understanding of trading and consult our economic calendar for upcoming data releases.

Size

You need to be aware of the impact of leverage on your profits and losses. Your total risk is not limited to your initial outlay, and gains and losses will be based on the full trade value. Correctly sizing your position should ensure that any losses sustained are manageable.

Exit points

Managing your risk should include choosing your exit points. You can use stop and limit orders to set specific levels to enter and exit positions. Stops can limit your potential losses and protect your profits. Following a disciplined trading plan can help reduce emotion in decision-making.

How do I start trading EUR/USD?

1. Choose the EUR/USD currency pair
2. Decide whether you prefer to trade EUR/USD via spread bets or contracts for differences (CFDs)
3. Open a trading account or practise with a free demo account
4. Choose how you want to trade
   • Spot, which is available via both spread betting and CFD trading
   • Forwards, which are available through spread betting
5. Decide whether to sell or buy
6. Open your position and monitor it

Research and education

• Many individuals prefer trading forex forwards because it enables them to take positions over the longer term without paying overnight funding costs. Learn about forward forex trading
• Learn about the differences between spread betting and CFD trading
• Spread betting has certain advantages. You can choose a determined amount per point movement using spread bets. This gives you more control over your position size and currency exposure. Spread bets are popular with traders because all your profits are tax-free, and there is no stamp duty or commission payable.* All spread bets are leveraged
• CFDs also have certain advantages. A CFD is a leveraged product similar to a spread bet. There is also no stamp duty to pay when trading CFDs as you don't own the underlying asset, but you're betting on its price movement. Your currency exposure and initial margin will vary according to the contract of the asset chosen. CFDs are popular with traders because you can offset losses on CFDs against profits for capital gains tax purposes, so they can be useful for hedging

Remember, trading with spread bets or CFDs comes with added risk attached to leverage. Your position will be opened at a fraction of the value of the total position size – but you can gain or lose money much faster than you might expect. You could lose more than the initial margin that you paid, and your potential profits and losses are magnified.

* Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.

Popular times to trade EUR/USD summed-up

• The most popular time to trade EUR/USD typically is between 1pm and 4pm (UK time) when the European and US trading sessions overlap. This is because EUR/USD trades with the highest liquidity and volatility during that time, creating the most trading opportunities
• Economic data releases, geopolitical events and central bank announcements may all impact the transaction volume and volatility in the EUR/USD exchange rate
• Carefully managing your risk is key when trading EUR/USD as you are using leverage

¹ Best Time to Day Trade the EUR/USD Forex Pair – Balance Money