Question

How the Euro’s Value May Respond to Prevailing Conditions.

Consider the prevailing conditions for inflation (including oil prices), the economy, interest rates, and any other factors that could affect exchange rates. Based on prevailing conditions, do you think the euro’s value will likely appreciate or depreciate against the dollar for the remainder of this semester? Offer some logic to support your answer. Which factor do you think will have the biggest impact on the euro’s exchange rate?

Answer 1

SOLUTION:-

The euro to dollor conversion tells you how many dollore the euro can buy according to the exchange rate it compares the euro value to dollore value. Exchange rate is that its exchange rate changes everyday this is because its traded on foreign exchange market the euro market depend on three factors the most important is the European Central benchmark interest rate II Investors take into account the debt levels of individuals country. Third the strength of European economy. Based on these factors Forex traders decide whether they think the currency will increase in value or not when economic growth is strong or when interest rates are Rising odds are traders will predict an increase in value they didn't get the price of others married the same data and decide the value of currencies will decline instead these factors bid the price down.

The euro railed 14% against the dollor in 2017 it remain between dollor 1.09 until Mav but it September 2017 it became dollor 1.20 Europe began lookong like a stronger economy but after the investigations into the connection between president Trump Administration and Russia worried investors the European to dollor 1.16 after Germany's close election but again its strength at the end of the year again so the euro is expected to go again higher.

Price and inflation:

• Inflation has a key factor that affects all currencies including the Europe in general countries with high levels of inflation relative to other countries will normally see their currency depreciate so that the prices of goods between countries remain relative equal in addition higher than expected inflation will result in Central Bank raising interest rates to tame inflation.
• BP measure of inflation is the eurozone in the consumer price index the indicator calculate the price of basket of goods at an average household is likely to purchase typically follow the core consumer price index which is normal consumer price index calculation including energy and food prices energy and prices tend to be volatile and can be greatly influenced by 10 degree supply and demand in balances as well as external random factors such as weather which can destroyed the consumer price index number.

Monetary policy :

• Every currency is affected by the monetary policies of its respective Central Bank for the euro that is European Central Bank and decisions regarding interest rates made by the European Central Bank Canal significant impact on road generally the European Central Bank press conference is friend to be the most important news to follow because interest rate change are usally anticipated well in advance by the market the structure of press release is Tripathi there is a prepared statement followed by an open press question period it is the question period that tends to cause the most currency volatility.

Economic growth:

• The next Saturday significant influence on euro is the overall economic output of the eurozone the economic growth and the health of the gross domestic product which is a periodic measure of the value of goods and services produced in the euro so the next Saturday significant influence on euro is the overall economic output of the eurozone the economic growth and the health of the economy is typically measured by the gross domestic product which is a periodic measure of the value of goods and services produced in the eurozone in general growth in GDP is a sign that economic strong and healthy which is positive for the currency.
• The eurozone GDP is quarterly report it prepared by Hero start unreleased about 2 months after the end use release does tend to move the currency market specially if there is a surprise in the actual release relative to expectaltions

Balance of payment :

• Will look at specifically the trade balance and the current about the current account is one of the three accounts that make up the Balance of pyments for a country this reports measure how country interacts with other countries with respect to trade balance income payments in other payments current account reports is a monthly report usually during the second week if each month by integrating this report a current account surplus means that there is more capital flowing into the economy then there is a existing the country which is positive for the currency this occurs when exports exceed import a current account deficit means the opposite More financial capital is leaving the country then there is coming in which is negative for the currency of Germany and France at two of the largest countries in the European market many traders will focus in the current account reports for these two Nations.

Hundreds of economic indicators that affect the Euro exchange rate

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