Whether you’re new to the euro currency or you’re looking to diversify your financial portfolio, there are several benefits to investing in this currency. These include the fact that it’s backed by guarantee facilities, it’s a store of value, and it’s at a turning point.
It promotes growth
Choosing a currency to trade with makes the arduous task of importing or exporting easier. This is especially true for smaller firms that are not confined to a single location. Similarly, cross-border investments within the euro zone can also be taxed more effectively. The stumbling block is figuring out which currencies are suitable for which projects. The best way to find out is to consult with experts. It is also worthwhile to consider the relative cost of living in your area. This is especially true if you are planning to relocate to the country.
As a matter of fact, the euro has become the currency of choice for almost 40% of global cross-border payments. As a result, smaller firms are finding it more profitable to sell their wares to the euro area.
It is a means of payment
Using the euro as a means of payment is a relatively simple and effective way to conduct business with companies in Europe. In fact, SEPA payments allow for international money transfers to be as simple as domestic transactions. Depending on your needs, you can make a SEPA payment in the form of a direct debit or credit transfer. Using SEPA is also easier and more cost-effective than using a foreign currency exchange. Using SEPA can help you improve your supplier relationships and negotiate pricing discounts.
SEPA is a payment method that uses payment processing rules from the European Payments Council. This is a set of rules that Payment Service Providers use to process electronic euro payments. The European Payments Council also updates SEPA payment schemes every two years. These rules are publicly available.
It is a store of value
Having a relatively stable currency is important for a healthy economy. The euro is a store of value. It serves as a currency, a medium of exchange and a unit of account. The euro is primarily used in the euro area, but also in former French colonies in Africa.
A store of value can be a physical asset or an interest bearing asset. Both types are valued, but the one with the least risk usually produces the greatest return. The law of supply and demand can also be used to determine which type of asset is a good store of value.
Physical assets, such as real estate, are considered a store of value because they tend to maintain their value over time. However, it is not always easy to sell land and houses. Also, commodity prices can be volatile, especially when world events affect the value of certain commodities.
It is backed by guarantee facilities
Despite the fact that the euro is no longer a basket of booze, it is still backed by two guarantee facilities. As well as the Eurobond and Euro-denominated notes, the euro is also backed by the European Investment Fund, which is a philanthropic juggernaut based in Frankfurt am Main. The EFSF’s mission is to facilitate economic recovery and help ensure a sustainable level of long-term financing. Aside from the usual suspects, Ireland and Portugal have also recently stepped up their game in the guarantee department.
The EFSF has also been in the lending business for a long time, and has been instrumental in ensuring the long-term financial stability of a number of eurozone member states. In fact, it was not long after the euro was introduced in 1999 that the EFSF stepped in to help rescue Spain and Portugal from a financial apocalypse.
It is at a turning point
ECB President Christine Lagarde has recently stated that the euro is at a turning point in monetary policy. That statement has pushed the euro up to one month highs against the US dollar.
Although the European economy has not yet been hit by a large adverse shock, there are a number of risks that have emerged in the economy. These risks include an increased government debt, higher interest rates and a decline in consumer confidence.
There are also growing concerns about the breadth of inflation in Europe. This is because inflation has outpaced wage growth and household savings. This exacerbates the problem, because firms have to pay exorbitant costs for production, which eats into their profit margins.
As a result, households have started asking for support, especially in energy-intensive industries. This could cause the euro to weaken.