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Factors Affecting EUR / USD Forex Trends.

Factors Affecting EUR / USD Forex Trends. :

The main such factor is the Eurozone itself with the 12 countries that use the euro in the calculation of the gross national product: Italy, Ireland, Luxembourg, Austria, Finland, Portugal, Spain, the Netherlands, Belgium, and Greece and of course Germany (being most powerful) and France. The European Central Bank (ECB) monitors the monetary policy of the Eurozone. Decision-making board : the Board of Governors, which is comprised of the Board of Governors and the national central banks. Within the Board included are the President of ECB, the Vice-President, and four other members.

Interest rates: refinancing rate of the ECB- a key bank short-term interest rate used for liquidity management. The difference between the ECB refinancing coefficient and the rate of the U.S. Fund is a good indicator for the EUR / USD Forex market investors. A 10-year government obligations: Another important investing factor is the rate of EUR / USD being the difference in interest rates between the U.S. and the Eurozone. A benchmark usually used being a 10-year German Bund. Since the coefficient of a 10-year Bund is below the U.S. 10-year Treasury notes, narrowing of the spread (ie, increasing the number of German or decrease in the amount of U.S. securities) of expectations, for the benefit of EUR / USD investments. Economic Data: the most significant economic data arriving from Germany, the largest economy. The most essential information is more often than not the gross national product, inflation (various coefficients to measure its quantity such as HICP or CPI) rates, manufacturing production and unemployment. In Germany, especially, a key piece of data is a review of IFO, which is a widely used indicator of business activity. Equally important is the budget deficits of individual countries, which, according to the Treaty on the growth and stability of investments should be kept below 3% of gross national product. Countries also have targets to further decrease their deficits, and difficulty in meeting these targets will likely be detrimental to the Euro. Cross Rate Turbulence : The EUR / USD rate is sometimes influenced by the cross traffic (non-dollar rate), for instance EUR / JPY or EUR / CHF. For example : EUR / USD may decrease in its value resulting the heavy optimistic news from Japan that is filtered through a depression of EUR / JPY.

Other possible factors: There is a powerful positive association between EUR / USD and USD / CHF, indicating of the strong similarity between the euro and Swiss franc. That’s because the Swiss economy is largely dependent on the euro area economy. In many situations, the fall of EUR / USD is coming with the fall in EUR / CHF. Political factors : Like all exchange rates, EUR / USD is subject to political instability, such as the threat of a coalition government in France, Germany or Italy. Political or financial instability in Russia- as a red flag for EUR / USD, because of the substantial amount of German investments directed to Russia.

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December 28, 2010 | In: Investment

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