EUR/USD News (Euro US Dollar)
If there is important U. The world's second-largest economy is approving rail projects at a rapid rate.
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Changes in tax policies are expected to create a huge demand for US dollar abroad because of repatriation of dollars back to the U. Regulatory incentives may also influence the availability of dollar funding.
The Fed will have a more hawkish tilt in with the new nominations. Jerome Powell indicated his preference for normalization of interest rates and maintaining that the Fed's balance sheet unwinding program. Wall Street friendly Fed chairman, Treasury secretary, and Council of Economic Advisers, forming a complete deregulatory trio which is positive for U. Fiscal policy will overtake the monetary policy in stimulating the US economy. Tax cuts could reduce the trade deficit by half.
The Fed will have to extend swap lines all over the world to allow some dollar liquidity but rates are going higher for this. Dollars because the U.
Oil being traded in other currencies does not impact the value of the Dollar. Chinese central bank to buy US Treasuries: In an unwind risk-off scenario, the USD strengthen on safe-haven flows. Dollar as the main reserve asset. Investors are paid to be long the dollar against most major currencies, a cheap way to hedge European or Japanese exposure.
Increasing deposits in emerging markets currencies funded by borrowing in USD yield hungry international investors are happy to have exposure given the better economic situation in EMs. Growth has converged, but monetary policy has not. Experts argue peak divergence - on the respective balance sheets - is still ahead. Germany continues to grapple with its political troubles and the possibility of facing new elections in The credibility of the ECB could be affected if the environment changes forcing the central bank to renege on its earlier guidance.
Rates may not rise until well after the end of asset purchases, which would push the first rate hike out to ECB tightening could increase the borrowing costs for countries like Italy and Spain. Italy will hold an election in March: In Italy, each of the four main parties opposing the Democratic Party subscribe to the introduction of a parallel currency to rival the Euro.
Despite the cyclical recovery, core inflation still shows no sign of a convincing upward trend low wage growth. German industry is competitive at stronger euro levels though the cost structure of other economies is not as favourable. The lending capacity of the ESM could be tested in the event of another recession in the Eurozone. To prevent runs on banks the EU is investigating a scheme to freeze bank accounts.
The next logical step is ban on cash altogether. The European banking system is over-leveraged and under-capitalized. The SRF is being built-up over a period of eight years The ECB contained its interest rates far to long. Add QE in the mix then the exchange rate becomes misplaced and trades at incorrect levels- a giant breakdown in the exchange rate is possible. Structural factors like the slow growth in working age population, and th rise in life expectancy, will continue to depress potential growth and thereby the natural rate of interest.
The regulatory demand for HQLA, including deposits at ECB and disincentive to take on short-term funding, should put downward pressure on short-term money market rates. The Italian banking system collapse: EUR has probably benefited from unhedged equity inflow and is vulnerable to a correction in equities. Mario Draghi's focus on growth and comparatively mild emphasis on the strong euro is seen as an endorsement to the EUR rising.
The Euro has increasingly become a funding currency, amongst others because rates are so low, speculators are borrowing in euros to buy higher yielding assets. In a risk off event, those speculators might have to reduce their bets and, as part of that, buy back the euro.
The euro may be a diversifier for those concerned about risk assets. European banks are no longer able to tap into U. Their clients may well decide to no longer seek a U. It is used to ascertain the value of the Euro against the US Dollar, telling traders how many Dollars are needed to buy a Euro. The Euro-Dollar is the most popular currency pair because its constituents represent the two largest and most influential economies in the world.
The US Dollar is the most traded currency on the forex market, and the Euro is the second most traded currency. Designed to facilitate cross-border trade between EU nations, the Euro was launched on December 31, at a rate of 1. Initially a digital accounting currency, it entered circulation within 11 EU countries on January 1, and ended that day of trading at a rate of 0. However, it fell significantly as a result of the financial crisis — hitting 1. Since then, Euro-Dollar has traded roughly between 1.
For live analysis, view our news and technical analysis articles below. The Euro-Dollar is attractive to forex traders because it offers high liquidity — a factor that often results in low spreads. It can also be a highly volatile pair, which creates opportunities for speculation.
When you see the price increasing on the chart, it could mean one of three things. It could mean that the Euro is strengthening, that the US Dollar is weakening, or that both are happening simultaneously. Whether you look at price patterns or fundamental news events, the chart can give you a sense of current trends. Find out the fundamentals that look likely to drive future price action.
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