LONDON, July 5, 2012 /PRNewswire/ --

In the following guide, we look at how you can trade forex with City Index ahead of today's ECB meeting [July 5 2012].

In the past week, the market has appeared split on whether the central bank meetings in Europe and the UK could improve investor confidence in the euro.

Euro Falls ahead of ECB Meeting

With that in mind, the euro fell against the US dollar in trading yesterday as economic data strengthened expectations that the European Central Bank (ECB) would announce cuts to interest rates at 12:45 BST today.

As mentioned above, the market has been split contemplating the alternative; ECB leaving rates unchanged in a bid to force the European governments to address economic weakness.

Joshua Raymond, Chief Market Strategist at City Index stated that - if the ECB does cut interest rates - the market is expecting 'a 25 basis point cut'.

How to Trade Forex Following ECB Meeting

All eyes will be on the euro this afternoon when the ECB announces their decision.

In the forex trading example below, we use the EUR/USD pair, showing you how you can potentially profit regardless of the direction the euro moves in following the announcement, with a City Index forex trading account.

Forex Trading Example: EUR/USD

Let us say you expect the euro to depreciate (fall) against the US dollar in the lead up, and following the ECB's announcement at 12:45 BST today.

Through a City Index forex trading account - unlike in more traditional trading - you can take a position on a falling market by going short and selling.

In the event the market moves in your favour, you will profit with every pip the euro depreciates against the US dollar.

However, if you are wrong and the market moves against you, you will incur a loss for every pip the euro appreciates or rises against the US dollar.

Alternatively, if you believe the euro will appreciate against the US dollar in the lead up, and following the ECB's announcement this afternoon, you can go long and buy.

In the event the market moves in your favour, you will profit in line with every pip the euro appreciates.

However, if you are wrong and the market moves against you, you will incur a loss for every pip the euro depreciates.

Start Trading Forex

To start trading forex across a range of trading platforms - including mobile and tablets - you can apply for a forex trading account through the City Index website.

Read More Forex Trading Tips

If you found this article helpful, you may want to read more just like this. You can access a range of forex trading tips, guides and articles through the Forex Trading section of the City Index website.

About City Index:

Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.

As a group, we transact in excess of 1.5 million trades every month in over 50 countries. We provide access to a wide range of instruments including margined foreign exchange, CFDs and, in the UK, financial spread betting.

We constantly look to improve the performance of our platforms and expand our range of services. The result is our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer support. Visit http://www.cityindex.co.uk for details.

Spread betting, CFD trading and forex trading are leveraged products which can result in losses greater than your initial deposit. Ensure you fully understand the risks.

SOURCE City Index