Introduction
In recent weeks the Euro has risen by over 7.00% against the dollar, based on lower inflation in the U.S and markets betting on interest rate cuts in 2023 by the Federal Reserve.
Fundamentally, the dollar has been strong against the Euro in 2022, as the Federal reserves interest rate hiking cycle strengthened the demand for dollars, relative to the demand for Euros due to higher interest rates in the U.S.
However, with inflation continuing to rise in Europe, at a time when U.S inflation looks to have peaked, interest rate differentials may narrow and cause a strong push higher in the value of the Euro.
In this video, I break down the fundamentals of why this trade idea may potentially play out.
#forex #forextrading #eurusd #eurusdanalysis #eurusdtradingstrategy
Join My Free Telegram Trading Channel For Daily Market Updates linktr.ee/kayanslifestyle
Website: linktr.ee/kayanslifestyle
Whatsapp: linktr.ee/kayanslifestyle
Telegram: linktr.ee/kayanslifestyle
Instagram: linktr.ee/kayanslifestyle
Video
Hello: everyone welcome to this short video I'm, going to talk about a trade idea that I'm looking at in the Forex markets: Euro USD, now fundamentally, okay, I'm, looking at the euro to go up against a dollar based on the Euro getting stronger in the past nine to ten days by around seven percent.
After the inflation data a few weeks ago came out which gave the markets a sigh of relief that may be.
Inflation in the US is coming down which can allow the U.S Central Bank to lower their interest rates in 2023.
Now, I'm going to be showing you in this video, what the fundamental reasons why we could see the Euro strengthen against a dollar, because in 2022, we've seen the dollar getting very strong against the Euro based on interest rates, inflation and central banks.
So I'm going to build a fundamental picture for why the markets have been moving.
The way they've been moving, based on their relative performance of the US economy, relative to Europe and I'm, going to show you some technical analysis that feeds into timing the trades to maximize your chances of making profit in a safe way.
So you can get a good idea as to why I'm looking at potentially the Euro going up against a dollar, because European inflation continues to rise, while U.S inflation is going lower, which basically means there's a Divergence potential Divergence in monetary policy between the European Central Bank, the U.S Central Bank, and interest rates literally Drive currencies guys when you're looking at the Forex markets.
So I hope this video adds some value.
Please, like comment subscribe, let me know if this video has helped you and enjoy my video on your USD, okay, guys so I'm looking at buying the Euro against a US dollar, potentially on what happens tomorrow with the European inflation data.
So it comes out at 10 A.M tomorrow.
Why? This is important is because European inflation continues to rise as the U.S inflation has actually been falling.
So if I take you to the over to the spreadsheet and we go and have a look at European inflation, we can see that European inflation continues to rise.
So you can see it's gone from five percent, all the way up to 10.7 percent.
Every month, inflation in Europe is rising, and it's exactly saying when you look at the core inflation number which strips out food and energy okay, so the inflation in Europe is going further away from the European Central bank's two percent Target in the United States.
Inflation has already started to move in the opposite direction, and we know we had a big move in the markets because of the latest inflation number, which came out below the Market's expectations and it caused a lot of weakness in a dollar, because markets were finally pricing in maybe we're going to get some interest rate cuts by the U.S Central Bank.
If inflation is falling, so you can see clearly, inflation in June in the United States was 9.1 percent.
It's now fallen to seven point.
Seven percent and core inflation has gone down to six percent, so inflation in the us is going down was European.
Inflation continues to rise, so why? This is important is because tomorrow, if the inflation data in Europe goes above the Market's expectation, so let's say um headline inflation, including food and energy, goes to 11 above the 10.7 expectation or core inflation goes to 5.2 for an example or 5.3.
Anything above the Market's expectations means inflation in Europe continues to run away from the central banks, two percent Target.
Now that's a problem for Europe, because they're trying to get inflation back down the European Central Bank has said to the markets time and time again.
If inflation continues to run away, they're going to get more forceful, with interest rates, to try to bring it down and remember higher interest rates just squeezes the spending capacity of consumers they can spend less and that should have an effect on the demand for goods and services, because people just don't have enough money to spend because they're already dealing with the energy crisis.
The food crisis with higher food prices, um petrol prices going up at the pump and then on top of that imagine you have higher interest payments on mortgages, credit cards, student loans, etc, etc.
So what that basically means is the U.S markets have already started the price in potentially that the U.S Central Bank can cut interest rates in 2023 if the slowdown in inflation in the United States persists? Okay.
So if you look at U.S Central Bank interest rates, we can see the FED started, raising rates in March.
Okay, we went from a quarter of a percent to half a percent if the Central Bank in Europe started raising rates after the United States in July.
So there was like three four months after the FED to try to catch up with inflation, okay, so they're further behind in the Federal Reserve, the European interest rates only two percent, the U.S interest rate- is already at four percent.
So that's what pushed down Euro USD the interest rate differential? Okay, that's what causes big move to go down 15, but we've seen since that weaker U.S inflation number, the exchange rate has really popped.
Higher pricing out U.S interest rates so just remember guys, interest rate differentials really do Drive the currency markets and, as I explained to you guys already.
The interest rate overnight carry really does direct currency Traders, for which way they want to buy a currency pair.
So as an example, European interest rates are two percent right now.
U.S interest rates are four percent.
So if I sell my Euros to buy dollars, I'm only paying two percent interest on the Euros I I borrow and I get paid four percent interest on the dollars, I purchase so obviously you're making money.
You're gonna make two percent interest on the amount of currency pairs that you bought in this exchange rate over 365 days.
So this explains why currency Traders have been selling Euros to buy dollars, because if you buy the Euro against a dollar throughout 2022, you would have been losing money effectively.
Okay, because you'd have to sell dollars to buy euros, you're paying four percent on the dollars.
You borrow and you're only going to pay two percent interest on the Euros you purchase, so that doesn't make sense if you're losing money every day.
However, the reason the Euros popped higher, because this interest rate differential could be narrowing and no longer paying that free money into your trading account as long as you hold this trade open.
So let's say tomorrow: um interest, um inflation is higher and the markets expect rates which they're expecting currently in Europe to go to.
If I show you over here on this spreadsheet, the European economy 2.25, let's say tomorrow, the inflation is higher and that pops up to an interest rate expectation of two and a half percent.
Well then, this interest rate differential between Europe and the United States Narrows.
So if Market expected to get to 2.5 percent now the difference is only one and a half percent.
So remember when you're looking at how many currency pairs you're trading.
If we're looking at this position, you'd see that you would be if you're buying the dollar against the Euro you're, making five thousand dollars a year in free interest, credited into your training account.
Okay, if you sell the dollar to buy the Euro you're, losing that much so, let's say we're buying dollars against Euros.
If the interest rate in Europe goes up, look what happens to this number? How much it goes down see it goes lower.
This is why carry trade investors who have been profiting from the higher interest rates in the US? If that interest rate differential really starts to narrow they're, going to really get out of the trade and cash in, because you'd rather get a 15 move for an example or where it is now is around nine percent, then watch the currency pair go up and you only make a four percent move if he was in the move from the beginning.
Okay, so this is where interest rate differentials will really pay play an important role in the currency pair moving forward.
So let's say U.S inflation continues to come down.
European inflation continues to go higher.
Markets are pricing in interest rate Cuts in the US, while surprising, an interest rate hikes in Europe.
Well, that interest rate differential is no longer as favorable in the US and that could really put pressure on Euro USD to move to the upside okay.
So this is something we have to pay attention to so I'm, going to watch this inflation report tomorrow to see how the markets react, because we could get a really good opportunity to buy euro USD, because the currency pair should push up based on industry differentials.
So it's going to be important to see what happens.
I'll, keep you guys up to date tomorrow after 10 a.m, and let's see how this plays out.
FAQs
Will Euro rise again 2023? ›
The improvement in the terms of trade is expected to contribute to a rise in the euro area current account, which is projected to rebound in 2023 and improve slightly further in 2024 and 2025.
What is the euro prediction for 2023? ›Upward revisions for the euro area are of a similar magnitude, with GDP growth now expected at 1.1% and 1.6% in 2023 and 2024 respectively. Inflation also surprised again to the upside, and it is now expected at 5.8% in 2023 and 2.8% in 2024 in the euro area, respectively 0.2% and 0.3% higher than in winter.
Will the dollar get stronger against the euro in 2023? ›The 2023 Outlook for Major Currency Pairs
EUR/USD is predicted to reach 1.10 in March 2023, before declining to 1.08 September 2023 and holding at 1.08 in December 2023.
In broad terms, the prospects are favourable for the EUR/USD to appreciate in 2023. The Euro had a difficult 2022 and won't need a lot of good news to bounce back. We also see the US Dollar losing some of its 'safe-haven' appeal in 2023 as inflation begins to taper off globally.
Is it a good time to buy euros with dollars? ›Is this a good time to exchange dollars for euros? This answer depends on your timeframe. The US dollar has gained value against the Euro throughout 2021, making now a good time to exchange dollars for euros.
What will the exchange rate be from euro to USD in 2023? ›Welcome to the 2023 EUR USD history summary. This is the Euro (EUR) to US Dollar (USD) exchange rate history data page for the year of 2023, covering 184 days of EUR USD historical data. Best exchange rate: 1.1211 USD on 06 May 2023. Average exchange rate in 2023: 1.0822 USD.
What is the future forecast for USD to Euro? ›The Euro Dollar Exchange Rate - EUR/USD is expected to trade at 1.07 by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate it to trade at 1.02 in 12 months time.
Which is the strongest currency in 2023? ›The latest country to join the euro area (also referred to as 'eurozone') was Croatia, which introduced the common currency on 1 January 2023. The euro was introduced as an accounting currency in 11 member states on 1 January 1999. The euro banknotes and coins started to circulate on 1 January 2002.
Will the euro rebound against the dollar? ›The euro is currently down 8.80% on the year against the dollar. With one month left in 2022 and a reduced likelihood of further hawkish ECB intervention until 2023, it's highly unlikely euro losses will be meaningfully recouped.
When should I exchange dollars for Euros? ›
It's generally a good idea to exchange currencies before traveling to ensure that you have some money available when landing in a different country.
What is the future of euro to dollar? ›In one month the Euro / Dollar exchange rate could be at 1.0894 according to market pricing as of 05/07/2023.
Will the Euro eventually surpass the dollar? ›Under two important scenarios nthe remaining EU members, including the UK, join EMU by 2020 or else the recent depreciation trend of the dollar persists into the future n the euro may surpass the dollar as leading international reserve currency by 2022.
What is the cheapest way to buy Euros? ›What is the cheapest way to get euros in the US? You'll need to compare exchange rates and fees for your bank with currency exchange services such as CXI. But a travel card such as the Wise international debit card can be a cheaper option, offering low fees and fairer, margin-free exchange rates.
Should I buy Euros as an investment? ›Currencies are not considered viable long-term investments. This is because they don't usually trend up over time as equities or bonds do. But if you're looking to diversify your portfolio abroad, you may want to look into foreign equities or bonds. These options offer much greater long-term upside potential.
What day is the cheapest to buy euros? ›Monday is therefore the best time to sell dollars and buy euros with a 2-3% lower total exchange rate. On the flip-side, Wednesday and Friday are the best days to sell euros and buy dollars.
What is the best day of the week to buy euros? ›Best day of the week to exchange currency
According to data from WeSwap and The Telegraph, you'll generally enjoy the best currency exchange rates on Fridays and Saturdays. Currency can fluctuate throughout the day too, with the morning or late afternoon cited as the best times to buy.
While some merchants in Europe may accept US Dollars, it is not widely accepted and you may receive a poor exchange rate. It's recommended to use Euros when in Europe.
What is the euro rate in may 2023? ›Currency Menu
Highest: 91.625 INR on 06 May 2023. Average: 88.951 INR over this period. Lowest: 86.463 INR on 08 Mar 2023.
| Month | Open | Low-High |
|---|---|---|
| 2025 | ||
| Jan | 1.069 | 1.052-1.084 |
| Feb | 1.068 | 1.039-1.071 |
| Mar | 1.055 | 1.044-1.076 |
What will euro to dollar exchange rate be in 2024? ›
Future currency rate of the currencies is predicted at 1.7357672513258 (59.537% ) after a year according to our prediction system. This means that if you invested $100 now, your current investment may be worth $159.537 on 2024 July 05, Friday.
Will the Euro exchange rate go up or down? ›The Pound Euro (GBP/EUR) exchange rate is expected to slide towards €1.11 over the next few quarters (three to six months) according to FX strategists at Commerzbank. At today's currency exchange rate valuation of €1.164, that prediction...
Which is stronger Euro or dollar? ›The euro shares the No. 8 spot among the world's strongest currencies, with 1 euro buying 1.08 dollars (or $1 equals 0.93 euro). The euro is the official currency of 20 out of the 27 countries that form the European Union. Euro coins and bank notes entered circulation in 2002, and the currency is free-floating.
How much is 1 dollar in 2023? ›Average exchange rate in 2023: 488.8819 NGN. Worst exchange rate: 447.3465 NGN on 02 Jan 2023.
Where is the US dollar worth the most 2023? ›| Austria | 1 USD – 0.93 Euro |
|---|---|
| India | 1 USD – 80.69 Indian Rupee |
| Brazil | 1 USD – 4.94 Brazilian Real |
| South Africa | 1 USD – 19.57 South African Rand |
| Mexico | 1 USD – 19.58 Mexican Peso |
The Swiss Franc, supported by renowned Swiss financial secrecy, is the most stable currency in the world. It has shown to be resilient in times of economic upheaval, and its value versus other currencies remains constant.
Will the euro be the next reserve currency? ›He said it is "absolutely conceivable that the euro will replace the dollar as reserve currency, or will be traded as an equally important reserve currency." As of 2021, however, the euro has not displaced the U.S. dollar as primary reserve currency due to the European debt crisis.
Will we be in Euro 2024? ›Germany will host EURO 2024, having been chosen to stage the 17th edition of the UEFA European Championship at a UEFA Executive Committee meeting in Nyon on 27 September 2018.
Which country will get the euro next? ›There is no definite answer as to which country will be the next to adopt the euro as its local currency. However, it is believed that it would next be Bulgaria. The euro is targeted to be introduced in January 2025, leaving behind the “Lev,” making the euro Bulgaria's second currency after more than 140 years.
What happens when euro rises against dollar? ›How does a stronger euro impact the economy? A stronger euro will help bring down inflation by making imports cheaper, much to the relief of the ECB. Imports like oil and gas and other commodities are mostly denominated in dollars, so, when the dollar weakens, they become less expensive in euro terms.
Will the euro keep getting stronger? ›
“We expect EURUSD to strengthen to 1.10 by end-2022, but with many risks. EURUSD has already moved to the consensus end-2023 forecast and very close to ours. The periphery remains a concern for the EUR, as the ECB has now turned hawkish. Energy prices could increase again.
What happens if U.S. dollar loses reserve status 2023? ›If the US dollar were to lose its reserve status, it would likely lead to a significant decline in demand for the currency. As central banks diversify their reserves, the dollar could face downward pressure, resulting in a depreciation of its value.
What is the best way to carry money in Europe? ›It's a small, flat, zippered pouch or belt that you wear around your body and/or under your clothes. It's the best way to carry valuable documents and money while travelling. Look out for money belts that look just like a regular belt – the last thing you want to do is make it very obvious that you're a tourist!
Where is the best place to convert dollars to Euros? ›Local banks and credit unions usually offer the best rates. Major banks, such as Chase or Bank of America, often offer the added benefit of having ATMs overseas. Online bureaus or currency converters, such as Travelex, provide convenient foreign exchange services.
How do you get the best exchange rate from dollars to Euros? ›Best: Use a debit card at an ATM
“Once you're abroad, you'll get a much more favorable rate using your bank's ATM rather than at an airport exchange kiosk,” says Jim Edrington, chief member engagement officer of the American Bankers Association.
- Highest: 1.1211 USD on 06 May 2023.
- Average: 1.0828 USD over this period.
- Lowest: 1.0549 USD on 08 Mar 2023.
| EUR | USD |
|---|---|
| 100 EUR | 108.62 USD |
| 500 EUR | 543.12 USD |
| 1,000 EUR | 1,086.24 USD |
| 5,000 EUR | 5,431.20 USD |
What will be USD to INR Rate in 2025? Long Forecast's USD to INR forecast 2025 suggests the start of the year around 79.79 Rupees. It expects the currency pair to average at 80 Rupees by mid-year before rallying further to 86.97 Rupees by the end of the year.
Will the euro drop below the dollar? ›Capital Economics senior markets economist Jonathan Petersen thinks the euro will continue to fall against the dollar, predicting it could sink to as low as 90 cents by mid-2023 before gradually rebounding.
Can I get euros at my bank in the US? ›You can buy euros with dollars at major banks like Wells Fargo and Bank of America. You will need to be a bank customer already and can order euros online easily.
Where is the best value to buy euros? ›
Waitrose has the best Euro rate right now at 1.1463. You'll need to order online to guarantee this rate; it may be lower if you turn up unannounced and buy over the counter. You can buy your euros online and collect them from your nearest Waitrose travel money store if you don't want to wait for home delivery.
How much euro to buy $100 dollars? ›| USD | EUR |
|---|---|
| 100 USD | 91.9843 EUR |
| 500 USD | 459.922 EUR |
| 1,000 USD | 919.843 EUR |
| 5,000 USD | 4,599.22 EUR |
Three key factors have been identified as causing the depreciation of the euro in 2022: Europe's heavy dependence on Russian energy and the associated economic slowdown brought about by the Ukraine invasion. The widening of the monetary policy gap between the Federal Reserve (Fed) and the ECB.
Where is the best place to invest $10,000 euro? ›Invest 10000 euros in the stock market
The stock market is an interesting option on which you can choose. By investing 10000 euros in shares on the stock market, you will benefit from a good return, the value of which depends on the type of share and the fluctuation of prices on the market.
The Euro Dollar Exchange Rate - EUR/USD is expected to trade at 1.07 by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate it to trade at 1.02 in 12 months time.
Will the euro ever recover? ›Even at the end of our forecast horizon in 2026, the euro is only seen recovering to USD 1.16 per EUR, below the average of 1.21 observed during the 2010s, and far weaker than the rates of over USD 1.50 per EUR achieved during the late 2000s.
Which is the best currency in the world 2023? ›The Kuwaiti Dinar (KWD) is the most valuable currency in the world. In Kuwait, the Indian ex-pat group has a strong presence, making the KWD to INR rate the most popular Kuwait Dinar exchange rate. The Kuwaiti dinar continues to remain the highest currency in the world, owing to Kuwait's economic stability.
Will the euro eventually surpass the dollar? ›Under two important scenarios nthe remaining EU members, including the UK, join EMU by 2020 or else the recent depreciation trend of the dollar persists into the future n the euro may surpass the dollar as leading international reserve currency by 2022.
What is the euro to USD forecast? ›In one month the Euro / Dollar exchange rate could be at 1.0894 according to market pricing as of 05/07/2023.
What will Euro to dollar be in 2025? ›| Month | Open | Low-High |
|---|---|---|
| 2025 | ||
| Jan | 1.069 | 1.052-1.084 |
| Feb | 1.068 | 1.039-1.071 |
| Mar | 1.055 | 1.044-1.076 |
What is stronger USD or Euro? ›
Euro: 1 EUR = 1.07 USD
As of May 2022, the euro (EUR) to U.S. dollar (USD) exchange rate was about 1 euro for $1.07.
A collapsed euro would likely compromise the Schengen Agreement, which allows free movement of people, goods, services, and capital. Each member country would need to reintroduce its national currency and the appropriate exchange rate for global trade.
When to exchange dollars for Euros? ›It's generally a good idea to exchange currencies before traveling to ensure that you have some money available when landing in a different country.