The Picture Is Not Looking Pretty for the Euro and the ECB Won’t Likely Help
Since the middle of July EUR/USD has been retreating with the price slipping below 1.07 shortly. Despite sporadic increases, sellers have continued to dominate the market as economic statistics from Europe have constantly shown that the Eurozone is experiencing a major economic downturn, which may cause the EUR to weaken.
Although there were some leaks yesterday which see higher inflation estimates for 2024 by the ECB, which are unquestionably the most crucial staff forecasts. These leaks send the market a signal that they want to raise interest rates, in my opinion. If not, the ECB is employing an odd communication tactic.
We saw that rate futures were heavily in demand before the disclosure, and the Euro was oddly strong on Monday. Therefore, there’s the option that part of yesterday’s price movement was influenced by whatever is going on behind the scenes. The question that arises now is why the euro is suffering despite increased chances of a rate hike. The response suggests a market that won’t be happy.
In any event, the market is still doubtful that this is a leak, and increase odds have dropped to 63% from a high of 75% today. Although I believe it to be true, the argument for purchasing the euro is still weak. This week we have seen more negative data from the Eurozone, and yesterday we learned that the German government has lowered its GDP projection into contraction.
Although the market prefers higher rates generally, it does not reward currencies when it believes a policy error has occurred. The argument for a quicker pace of rate decreases subsequently is strengthened by raising rates now in Europe when the economy is obviously weakening. I believe that the decision to raise interest rates again by 25 bps will cause EUR/USD to move up, but that the larger bearish trend will resume again soon.
EUR/USD Live Chart
ABOUT THE AUTHOR
See More
Sidebar rates
Add 3442
Related Posts
SaveAdd 3440
Join 350 000+ traders receiving Free Trading Signals
Alerts
Rates
Calendar
Signals