Factors affecting Eurodollars
One of the most popular currency pairs in the Forex market is the EURUSD. Therefore, we decided to examine the most important factors affecting the euro in this article.
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Eurozone
Twelve countries have adopted the euro as their currency: Germany, France, Italy, the Netherlands, Spain, Belgium, Austria, Finland, Portugal, Ireland, Luxembourg and Greece.
European Central Bank
It oversees European fiscal policy, with its decision-making body being an association of executives and heads of national central banks.
Political goals of the European Central Bank
The European Central Bank’s first view is price stability. There are two basic elements to fiscal policy. The first is a vision for value development and the second is risk for price proof. Price stability is defined as an increase in the Consumer Price Index (HCIP) below 2%.
When the HCIP index is in the right range, the scales as well as the forecasts set an intermediate risk for price stability. The second pillar of financial growth is known as M3. The European Central Bank has a 4.5-year-old resource for M3 growth.
The European Central Bank has a meeting on Thursdays to set interest rates, during which a full review of political and economic issues will be held on the first day of the month.
Interest rates
The European Central Bank’s surplus interest rate is a short-term key interest rate that can be easily used to manage the economy. The difference between the reinvestment rate and the US federal capital is a great measure of the US euro rate.
European quarterly foreign exchange reserves
Foreign exchange reserves are accounts in which foreign currency is stored in foreign banks. For example, accounts in Japan that are stored outside of Japan are called euro-in. Euro accounts outside the euro area in banks are also called Euro-Euro. That is why the quarterly interest rate on European foreign exchange reserves is influenced by banks outside the euro area where foreign exchange reserves are held. This helps us estimate exchange rates. For example, the difference in interest rates between the US dollar and the US dollar is affected by the euro reserve, and if this rate is higher than the dollar reserve interest rate, the US euro-dollar value tends to rise. In some cases, due to the influence of other factors, it is practically impossible to observe this relationship between these factors.
10-year government bonds
Another important factor in the price between the euro and the US dollar is the difference between interest rates in the US and the euro area. German 10-year bonds are usually the determining factor at this time. Because if the 10-year rate of German securities is lower than the US (for example, rising yields in Germany or falling yields in the US) we can expect the US euro-dollar price to rise in theory, and vice versa. Therefore, in this regard, 10-year bonds between Germany and the United States and knowing their value can be a suitable and determining factor for predicting the exchange rate. It should also be noted that the process of changing the value of these securities is much more important than knowing their value alone. Of course, the difference in interest rates usually depends on market expectations of future growth between the US dollar and the euro area, and this is one of the main and influential factors on the exchange rate.
Finance Ministers
Germany: Hans Eischel replaces Oscar-winning left-wing minister Oscar Lano Netham in March 1999
France: Christine Sutter, Dominic Strauss’ successor, was appointed in November 1999.
Italy: Minister of Finance Visco and Minister of Treasury and Budget Mr. Gualiano Amato
Economic information
Europe’s most important economic data is about Germany, which has the largest economy in Europe and is still growing statistically in Europe. In this context, the main information is usually GDP, inflation, including CPI (HICP), industrial production and unemployment rate. For Germany in particular, it can be said that a key point of information includes IFO research, which is an indicator for The German budget deficit, which reflects its growth and stability, should be less than 3% of GDP, and countries are trying to Reduce the deficit gradually, and if they fail to do so, they will cause serious damage to the price of the euro (as we saw in the Italian budget deficit).
Interaction of exchange rates
The euro-US dollar exchange rate is sometimes affected by changes in exchange rates (other than the dollar). One of these rates is the value of the euro – this. To better clarify this issue, it can be said that the price of Euro-dollar can be affected by positive news about the decline in the rate of Euro-In. Even if, for example, the US dollar-yen depreciates, the weakening euro may cause the euro-US dollar to depreciate.
Quarterly futures contracts
These contracts reflect market expectations for future quarterly investments. The cash difference from futures contracts and the amount invested in these contracts is a key variable in determining these market expectations about the US dollar-euro exchange rate.
Other indicators
There is a strong negative correlation between the euro-US dollar and the value of the US dollar-Swiss franc, which indicates an inverse relationship between the value of the two currencies. This is because the Swiss economy is largely independent of the European economy, and in most cases an increase (decrease) in the euro-US dollar is usually accompanied by a decrease (increase) in the value of the euro-Swiss franc, and vice versa. This relationship can usually not be explained by information about specific events in the two countries alone.
Political agents
Like all exchange rates, the US euro-dollar price is affected by political stability and alliances between the governments of France, Germany and Italy. High political instability in Russia, for example, could signal a threat to the US euro-dollar price. The reason for this can be attributed to Germany’s large investments in Russia.
Economic indicators
A wide range of economic factors can affect market exchange rates. Of course, it should be noted about these factors that some of these factors affect the whole market while others will only affect the exchange rate of a particular country.
Car sales
The number of cars sold in a particular 10-day period is one of the economic factors influencing the exchange rate. The timing of this index (ie delivery three days after the ten-day period) has made this index one of the most important economic information in the United States. The amount of this factor and its delivery time make car sales a major indicator of US retail sales and specific consumer spending.
The rest is paid
Summary of economic transactions between a government and the rest of the world, including goods, services, financial assets and the tourism industry is one of the economic indicators in this field. The balance of these payments is divided into two general parts: current accounts and capital accounts.
Balance of transactions (commodity transactions)
The difference between the amount of exports and imports of goods in a country is one of the economic factors affecting the economy. In this regard, a positive balance is obtained when the country’s exports exceed its imports. Negative balance also occurs when the country’s imports exceed exports. The increase in exports in this regard is added to the gross national product, while the country’s imports are deducted from the gross national product. The trade balance of goods in the United States in the mid-1970s has always been negative. The increase in this deficit can indicate an increase in the consumption of the people in this country, which is one of the factors indicating the economic power of the country.
The Gray Book of Federal Research
One of the factors reflecting the current economic situation in the country is the research published in the US Gray Book, which is published eight times a year by the Federal Reserve and includes current economic information and economic conditions in the country and information about key economic and trade contracts. There are market expectations and other factors. This book sheds light on important economic information in the country, and this research is usually done in a four-week period and is published two weeks before the FOMC meeting, which also meets eight times a year. Contrary to Rich’s research or backward reports around the world, the American Brown Book is a useful indicator for financial policy decisions adopted by the FOMC.
Economic inventories and sales
Assets and economic sales are made up of reported data that includes barter orders, orders. The reason for this is that through it the total output produced can be distinguished from GDP. As a result, it can be said that economic inventories are important documents to predict the future economic path. Before computerization, companies should measure micro inventories and use less measuring materials.
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