- EUR/GBP may be strengthened after Germany’s agreement on debt reform and a significant increase in government spending.
- European Central Bank Vice President Gindos indicated that President Trump’s policies contribute to greater economic uncertainty than the Covid-19 crisis.
- The Bank of England is widely expected to maintain the 4.5 % interest rate in Policy Resolution on Thursday.
EUR/GBP remains stable about 0.8410 during the early European trading hours on Monday, after gains in the previous session. The ups of the Saudi cross with the support of the euro (EUR) after Germany reached an agreement on debt reform and a significant increase in government spending.
On Friday, the upcoming adviser Friedrich Mirz obtained an agreement with the green and social democratic parties before a decisive parliamentary vote on Tuesday to review borrowing rules. If the proposal secures a two -thirds majority, the expanded spending plan can significantly enhance the EUR/GBP cross.
Meanwhile, the European Central Bank Vice President (ECB) Lewis de Gindos expressed his concerns on Sunday, saying that President Trump’s policies create more economic uncertainty than the Covid-19 crisis, according to Bloomberg. Gindos noted that the new American administration seems less inclined towards pluralism, which enhances international cooperation – a transformation described as a major source of instability.
In addition, the European Central Bank’s Board of Directors and Banque De France François Villeroy de Galhau emphasized the need for the euro to enhance its global influence. In an interview with * La Tribune Dimanche * during the weekend, he called for the creation of a “strong union and investment” to attract international investors to the euro.
The EUR/GBP cross takes advantage of the weaker pounds (GBP) after the report of the total disappointing local product on Friday. Data showed an unexpected contraction of 0.1 % month in January, lacking market expectations to expand 0.1 %. This decline was mainly driven by weakness in the production sector.
Last month, the Bank of England (BOE) reduced its expectations in the first quarter to 0.1 %, down from 0.4 % expectation in November. Investors are now focusing on the monetary policy decision on the Bank of England on Thursday, where interest rates are expected to remain unchanged at 4.5 %.
Common questions euro
The euro is the currency of the 19 European Union countries belonging to the eurozone. It is the second most traded currency in the world behind the US dollar. In 2022, it represented 31 % of all foreign exchange transactions, with an average daily rotation of more than $ 2.2 trillion per day. EUR/USD is the most trading currency pair in the world, which represents an estimated 30 % of all transactions, followed by EUR/JPY (4 %), EUR/GBP (3 %) and EUR/AUD (2 %).
The European Central Bank (ECB) in Frankfurt, Germany, is the backup bank. The European Central Bank sets interest rates and runs monetary policy. The primary mandate in the European Central Bank is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary performance is to raise or reduce interest rates. Relatively high interest rates – or expect higher rates – usually benefit from the euro and vice versa. The Board of Directors of the European Central Bank is making monetary policy decisions at eight times a year. Decisions are made by the heads of national banks in the eurozone and six permanent members, including the President of the European Central Bank, Christine Lagarde.
The inflation data in the euro area, measured by a coordinated index of consumer prices (HICP), is an important economist for the euro. If inflation increases more than expected, especially if it is 2 % higher than the European Central Bank’s goal, then the European Central Bank is obliged to raise interest rates to return it in control. Relatively high interest rates usually benefit compared to its euro counterparts, as it makes the region more attractive as a place for global investors to stop their money.
Data ejaculates a measurement of economics health and can affect the euro. Indicators such as GDP, manufacturing, PMIS, employment services, and consumer morale surveys can affect the trend of uniform currency. The strong economy is useful for the euro. Not only is to attract more foreign investment, but the European Central Bank may encourage interest rates, which will enhance the euro directly. Otherwise, if economic data is weak, the euro is likely to decrease. Economic data of the four economies in the eurozone (Germany, France, Italy and Spain) are of particular importance, because it represents 75 % of the eurozone economy.
Other important version of the euro is the commercial balance. This indicator measures the difference between what a country gains from its exports and what it spends on imports during a certain period. If a country produces very absolute after exports, its currency will obtain a purely value of the additional demand created from foreign buyers who seek to buy these goods. Therefore, the positive and positive trade balance enhances the currency and vice versa to achieve a negative balance.
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