We ask what are the pros and cons of a stronger euro equity meaning in hindi


The euro to dollar exchange rate remains strong on Thursday, 6 September, quoted at 1.19378 (+0.1%) ahead of today’s ECB interest rate decision and policy decision.

"We head into the ECB with prices still within 1.1820 support and the 1.1980 reaction high from last week. Overall we believe that the 1.20-1.23 area will cap this year’s rally for a correction back towards 1.16-1.15 support cnn after market futures. A move through 1.1980 would suggest another test into the upper resistance region, while a break of 1.1820 and then more important trend support at 1.1770/55 would confirm the broader correction is underway."

Although data out of the euro zone remains strong, many expect the effects of a surging Euro to soon weigh on the economy. A 15% increase in EURUSD is bound to have knock-on effects somewhere.

But if the ECB is worried by the rapid appreciation of the Euro, it has kept it very quiet euro forecast 2016. Either they are happy with the current exchange rates, or they are powerless to do anything about them.

Certainly there are differences of opinion whether EURUSD at 1.2 should be a concern. On one hand, a strengthening currency leads to lower inflation, something central banks are desperately trying to avoid, but on the other it shows improved strength and confidence in the economy.

One challenge for Mario Draghi in tomorrow’s ECB policy meeting will be to contain the market reaction while acknowledging recent economic positives and perhaps paving the way for QE taper.

Will he attempt to talk down the Euro? A Bloomberg poll of economists shows that 41 out of 61 surveyed expect Draghi to address the strength in the currency at this week’s meeting gbp vs usd bloomberg. This was a tactic attempted earlier in the week by the RBA who said this,

‘The Australian dollar has appreciated over recent months, partly reflecting a lower US dollar. The higher exchange rate is expected to contribute to the subdued price pressures in the economy cnnmoney premarket futures. It is also weighing on the outlook for output and employment. An appreciating exchange rate would be expected to result in a slower pick-up in economic activity and inflation than currently forecast.’

But following this statement AUDUSD rallied and once more attempted to break 0.8 current stock market futures. It is still hovering at this resistance level today usd cad exchange rate history. If the RBA wanted the market to back off, they didn’t do a very convinicing job.

In it they claim a 10% appreciation in EURUSD leads to 0.3% lower inflation over the next six quarters. As we know, EURUSD is up 15% in 2017.

‘The exchange rate tends to influence euro area inflation both directly and indirectly via the prices of imported final consumer goods and that of imported intermediate goods eur usd history. Movements in the exchange rate tend to have a quicker and larger impact on the first stage (import prices) of the pricing chain compared with later stages. Our econometric model shows that a 10% change in the EURUSD rate leads to a 30bp change in HICP inflation over the next six quarters’, they said.

This means the ECB may have to revise down its inflation expectations for 2018, and they may do so as early as tomorrow’s meeting forex rates in pakistan today open market. Such an announcement will help them indirectly talk the Euro down.

Draghi will want to acknowledge this, and will no doubt be privately very pleased by the rebound in GDP and the soaring PMIs. Here is how ANZ bank puts it,

‘…the current strength in the exchange rate reflects improved confidence in the euro area’s economic prospects and fading deflationary risks binary to gray code. That is something to be welcomed by the ECB, not shied away from. Euro strength reflects capital inflows to the region, which are supporting other asset prices (equities, credit) and contributing to loose financial conditions.’

Draghi will therefore have to balance these positives without exciting the market too much and stifling the recovery with a too strong currency.

Topics: Euro, US Dollar, Australian Dollar, Exchange Rates, Germany, Exchange Rate Forecasts, Euro Exchange Rate, EUR USD, EUR to USD, European Central Bank, Euro to Dollar, Dollar Exchange Rate,

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