Inside the Currency Market: Mechanics, Valuation, and Strategies

Euro Yield Curve

The yield curve for the euro comprises four nations: france, Germany, Italy, and Spain (German Finance Agency). Of the four, German bonds, called bunds, comprise 21 percent of the European debt market, Italian bonds called BTPs are 29 percent, French bonds called OATs are 20 percent, and Spanish bonds called Letras del Tesoro comprise 7 percent (Investinginbondseurope.org).

The focus to trade the euro/U.S. dollar will be granted to German bonds due to Germany's powerful and always leading economic position in the euro zone, its low debt compared to the others—euro 1.043 billion—and its close proximity to the Frankfurt Stock Exchange. Plus the ECB is housed in Frankfurt and the German Bundesbank.

Prior to the euro, the German ...