Forex options traders should continuously follow economic indicators in the euro zone and U.S., as these reports can provide valuable information on the direction of market movement.
With weaker than expected German inflation data, speculation in the currency markets is that the European Central Bank may loosen monetary policy, according to Reuters. As a result, the dollar rose against the euro in late April. The dollar was also up against the Japanese yen.
“If inflation comes in too low, that raises expectations the ECB will lower rates or take other steps that will hurt the currency,” Eric Viloria, currency strategist at Wells Fargo Securities in New York, told Reuters. “Germany is Europe’s biggest economy, and we will be watching what happens.”
However, weak German inflation doesn’t mean the euro zone isn’t going to make progress in the near future. Therefore, forex options traders shouldn’t think it is a sure thing that the dollar is going to continue to climb against the euro.
In fact, ECB Vice President Vitor Constancio said the euro zone has made progress recently, as banks are repaying long-term loans and rebuilding investor confidence, according to the Wall Street Journal.
“Given where we stood barely two years ago – on the edge of redenomination risks – such progress is encouraging,” he said. “However, it does not mean we are entirely out of the danger zone.”
With the potential for future improvement, investors will want to keep a close eye on euro zone economic indicators. For example, future inflation reports could signal momentum that could push the euro in a positive direction against the dollar – important information for binary options traders.
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Article provided by HY Markets Forex Blog
