The battle of the Euro – cuts by the ECB president Mario Draghi

European Central Bank battles with the Euro valueWhile the Euro had slid considerably last week after the recent round of ECB interest rate cuts, the announcement by ECB president Mario Draghi that further cuts may be necessary has further dampened the outlook for this embattled currency.

Many online forex traders take such a stance as an indicator that economic conditions in Europe are far from sorting themselves out in the short to medium-term.

However, it must be stressed that most analysts did not see such a move as a surprise. Thus, although the Euro has weakened in trading, the Euro did not fall past any specific levels; instead losing .3% to land at $1.3076 at close of business on May 6th. This highlights the predominantly bearish outlook that many economists and forex traders have adopted in recent months.

In contrast, the US Dollar Index had continued to gain momentum as hopes gather that the Federal Reserve may be moving away from its recent cycle of quantitative easing. This has caused the greenback to trade .36% higher as of the closing bell on the 6th of May.

Other domestic indicators in the United States are also seen as gaining momentum. Most major US stocks have continued to rise while the S&P 500 has extended its all-time rally from the previous week. A large portion of this movement can be attributed to the release of optimistic employment figures. Some view this movement as a signal that the industrial and economic stagnation that has gripped the United States may finally be lifting.

Summarily, online forex trading policies will most likely continue to centre around a cautious, low exposure approach. While some astute investors may attempt to capitalise on the perceived strength of the dollar as opposed to the stagnation of the Euro, many traders may instead opt for a “wait and see” approach to determine whether the domestic economy in the United States is truly beginning to revive.

Leave a Reply