International Financial institution and markets Essay

International Financial institution and markets - Essay Example The report seeks to identify various factors which are considered as of advantage as well as of disadvantage for the UK to enter into such an agreement of currency union. It also deals with whether the Euro could substitute the US dollar as the major currency in the global market. 2 Euro is considered to be a currency that is widely used by the European Union Institutions and it is said to be the official currency for euro zone. Euro zone comprises 18 member states out of the 28 member states that is said to constitute the European Union such as Spain, Slovenia, Netherlands, Malta, Portugal, Luxembourg, Greece, Germany, France, Finland, Estonia to name a few. There are also other five European countries that use the currency Euro and as a consequence is said to be used by 334 million Europeans currently. Moreover it is considered that 210 million people across the universe including 182 million from Africa use currencies that are said to be pegged to the currency euro. Euro is considered to be the second largest reserve currency in the globe after the US dollar. It is also considered as the second most traded currency in the universe after the US dollar. Euro is considered to be a single currency arrangement which came into force between members of European Uni on in the year 1999. The implication of a single currency is that there are no different national monetary policies. In this regard, the Central Bank of Europe was set up which used to conduct wide monetary policy and also sets the interest rates in Europe. This resulted into a loss of different national monetary policies, exchange rates, and interest rates. In this regard, the intention of Germany to introduce an economic policy to fight against unemployment is considered as very difficult as this role can only be played by the European Central Bank. There are numerous advantages to sector of financial services with regard to Britain joining the Euro. In the absence of floating exchange rate, the relative