Investors who participate in forex trading should be tracking the actions of the European Central Bank, as it could have a major impact on the direction of the euro against the U.S. dollar.
According to Investing.com, EUR/USD showed stability despite comments from the ECB that were meant to keep the single currency down. EUR/USD has had either a 1.37, 1.38 or 1.39 handle for the last 28 working days, but European Commission vice president for industry Antonio Tajani said future gains could hurt the economies of certain European nations.
“[The euro at 1.40] hurts the economies of Spain, Italy, France and, in the long run, Germany,” Tajani said.
Two things forex traders should pay attention to include the ECB considering negative interest rates and asset purchases to guard against dangerously low inflation, according to MarketWatch. This would be a more aggressive approach toward getting the euro zone economy out of trouble, and could have a major impact on the EUR/USD.
There are many factors forex traders can watch to help predict the ECB’s stance on interest rates. The most relevant economic indicators include the consumer price index, consumer spending, employment levels, subprime market and housing market.
When these indicators improve, the ECB could be forced to push interest rates higher, which is valuable information of forex traders. However, slight improvement could lead to no movement. Additionally, traders should watch for major announcements from the central bank, as these can provide valuable information about where interest rates are headed.
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