Forex News
Amidst the closure of the Strait of Hormuz due to the ongoing war in the Middle East involving the United States (US), Israel, and Iran, Japan has started releasing oil from its energy reserves.
The Japanese government said in a statement posted in the official gazette on Monday that it will start lowering the country’s strategic holdings from March 16 to April 15. There will be a temporary formula for calculating the required volume, the government added.
Tokyo had already announced that it will release oil from its reserves in an attempt to ease surging gasoline prices across Japan.
In the official gazette, the government has stated that it will lower the amount of oil reserves that oil refiners and other businesses are obliged to maintain to 55 days’ worth from 70 days’ worth.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
release
- Gold price remains steady near $5,000 in Monday’s early Asian session.
- US officials said that the Iran war is expected to end within the next few weeks.
- Rising oil prices could lead to prolonged inflation and potentially higher interest rates, weighing on the Gold price.
Gold price (XAU/USD) steadies around $5,000 during the Asian session on Monday. However, the precious metal faced selling pressure as uncertainty surrounding the monetary policy announcement by major central banks this week is dominating the intense geopolitical conflict in the Middle East. Traders will closely monitor the developments surrounding the United States (US)-Israel war with Iran, a scenario that typically boosts the demand for safe-haven assets.
The US President Donald Trump administration said that they expect the conflict in Iran to come to an end within weeks or “sooner.” Meanwhile, Israel’s military noted that it plans for its campaign to continue for at least three more weeks.
Over the weekend, US forces targeted every military site on Kharg Island, a critical Iranian oil export hub. Iran has threatened to retaliate against any US-linked oil facilities in the region.
Although war is generally expected to boost the Gold price, the current growing tensions have led to an increase in oil costs. This, in turn, has fueled concerns about inflation and led markets to believe that the Federal Reserve (Fed) will delay cutting interest rates, which is negative for non-yielding assets, such as Gold.
Apart from the Fed, the Reserve Bank of Australia (RBA), the Bank of Japan (BoJ), the European Central Bank (ECB), and the Bank of England (BoE) are scheduled to announce their monetary policy decisions this week. All central banks are expected to leave interest rates unchanged at their current levels, except the RBA, which is expected to raise them again.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Iran’s Foreign Minister, Abbas Araghchi, claimed Israeli strikes on fuel depots across Tehran amount to "ecocide," citing the impact on the health of the Iranian capital’s residents, the Guardian reported on Monday. He added that Israel must be punished for its war crimes.
“Israel’s bombings of fuel depots in Tehran violate international law and constitute ecocide,” Abbas Araghchi wrote on X. “Residents face long-term damage to their health and well-being. Contamination of soil and groundwater could have generational impacts.”
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is up 0.51% on the day at $97.45.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
- GBP/USD strengthens to near 1.3255 in Monday’s early Asian session.
- The Fed is likely to keep rates unchanged at its March meeting on Wednesday.
- The BoE is widely expected to maintain the rates on Thursday.
The GBP/USD pair gains momentum around 1.3255 during the early European session on Monday, bolstered by a weaker US Dollar (USD). The major pair currently trades near its lowest since December 2025. Traders might turn cautious ahead of the US Federal Reserve (Fed) and the Bank of England (BoE) interest rate decisions later this week.
The Fed is widely expected to hold the benchmark federal funds rate steady at its current range of 3.50%–3.75% during its upcoming March meeting on Wednesday. Due to persistent inflation risks, many analysts have pushed back expectations for the next rate cut to September.
"The war ... poses downside risk to economic growth and upside risks to inflation, so central bank responses will very much depend on the recent context, specifically whether inflation has been above, on, or below target," said Carol Kong, a currency strategist at Commonwealth Bank of Australia.
The UK central bank is anticipated to keep interest rates on hold at 3.75% when it meets on Thursday. Oxford economists said a worst-case scenario where oil rises to $140 a barrel would drive inflation much higher and send the UK economy into a mild recession.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
- The Indian Rupee gains ground against the US Dollar after a four-day winning streak; its outlook remains grim.
- US President Trump expresses confidence that a few nations are ready for joint operations to open the Strait of Hormuz.
- FIIs have remained net sellers on all trading days so far in March.
The Indian Rupee (INR) snaps four-day winning streak against the US Dollar (USD) on Monday. The USD/INR pair opens lower to near 92.80 as the US Dollar’s rally hits a pause amid speculation that the Strait of Hormuz could reopen soon.
As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.3% lower to near 100.20. The USD Index corrects after posting a fresh over nine-month high of 100.55 on Friday. The US Dollar has outperformed in the past few weeks amid rising oil prices, given that the United States (US) is a net exporter of oil.
Trump calls on nations to intervene to reopen Strait of Hormuz
The speculation for the reopening of the Strait of Hormuz, a channel through which 20% of global oil is supplied, which is closed as part of retaliation by Tehran against joint attacks by the US and Israel on Iran, has come into the picture as President Donald Trump has claimed that he is getting a good response from other countries for intervention.
“Many Countries, especially those who are affected by Iran’s attempted closure of the Hormuz Strait, will be sending War Ships, in conjunction with the United States of America, to keep the Strait open and safe,” Trump said in a post on Truth.Social adding, “Hopefully China, France, Japan, South Korea, the UK, and others, that are affected by this artificial constraint, will send Ships to the area so that the Hormuz Strait will no longer be a threat by a Nation.”
There seems to be a limited impact of Trump’s attempts to reopen Hormuz on the oil price, which has surrendered its opening gains.
Given that India is one of the largest importers of oil in the world, a higher oil price is an unfavorable situation for the Indian Rupee.
Meanwhile, Iran has allowed passage to Indian ships from the Strait of Hormuz, which has diminished oil and Liquefied Petroleum Gas (LPG) supply concerns. India’s Ministry of Ports confirmed over the weekend that two Indian-flagged tankers carrying LPG crossed the Strait of Hormuz early morning safely and are en route to India, Al Jazeera reported.
FIIs continue to dump stake in Indian stock market
Broadly, the outlook of the Indian Rupee is expected to remain weak due to the continuous outflow of foreign funds from the Indian stock market. So far in March, Foreign Institutional Investors (FIIs) have remained net sellers on all trading days, and have offloaded their stake worth Rs. 56,883.22 crore.
In Monday’s session, investors will focus on India’s Wholesale Price Index (WPI) Inflation data for February, which will be published at 12:00 IST (06:30 GMT). The data is expected to show that inflation at the wholesale level grew at an annualized pace of 2%, faster than 1.81% in January.
This week, the domestic trigger for the US Dollar will be the monetary policy announcement by the Federal Reserve (Fed) on Wednesday.
Technical Analysis: USD/INR retraces after four-day winning streak
USD/INR drops to near 92.80 in the opening trade at the start of the week. However, the near-term bias is bullish as price holds above the rising 20-day Exponential Moving Average, which is around 92.00.
The sequence of higher closes from late in the series keeps buyers in control despite a minor pause, while the 14-day Relative Strength Index (RSI) around 72 stays in overbought territory but has not yet signaled a momentum reversal. Overall, the technical backdrop favors further upside while the pair remains above its short-term trend support.
Initial resistance is located at the recent high near 92.97, and a daily close above this level would open the way toward the psychological 93.50 zone next. On the downside, immediate support emerges at the 20-day EMA near 92.00, with a break below this area exposing deeper retracement toward 91.30 as the next notable floor. As long as pullbacks are contained above the 92.00 region, the path of least resistance stays to the upside.
(The technical analysis of this story was written with the help of an AI tool.)
Indian Rupee FAQs
The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.
The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.
Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.
Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.
Gold prices remained broadly unchanged in India on Monday, according to data compiled by FXStreet.
The price for Gold stood at 14,997.81 Indian Rupees (INR) per gram, broadly stable compared with the INR 14,985.33 it cost on Friday.
The price for Gold was broadly steady at INR 174,931.50 per tola from INR 174,785.90 per tola on friday.
Unit measure | Gold Price in INR |
|---|---|
1 Gram | 14,997.81 |
10 Grams | 149,979.10 |
Tola | 174,931.50 |
Troy Ounce | 466,487.10 |
FXStreet calculates Gold prices in India by adapting international prices (USD/INR) to the local currency and measurement units. Prices are updated daily based on the market rates taken at the time of publication. Prices are just for reference and local rates could diverge slightly.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
(An automation tool was used in creating this post.)
- EUR/JPY rises as risk aversion eases after reports US Energy Secretary Chris Wright expects the Iran war to end within weeks.
- Rising oil prices highlighted Europe’s vulnerability to higher energy costs and potential trade balance deterioration.
- Traders expect that Japanese authorities may intervene in the foreign exchange market to curb the JPY’s weakness.
EUR/JPY gains ground after two days of losses, trading around 182.60 during the Asian hours on Monday. The currency cross advances as the Euro (EUR) gains support against its peers after The Guardian reported that US Energy Secretary Chris Wright expects the US-Israel conflict with Iran to end within “the next few weeks,” potentially allowing oil supplies to recover and energy prices to ease.
However, the EUR/JPY cross’s upside may remain limited as the Euro continues to face pressure from rising oil prices, underscoring Europe’s vulnerability to higher energy costs that could weigh on the region’s trade balance. The recent surge in energy prices has led money markets to price in two European Central Bank rate hikes this year, a sharp shift from last month, when no policy moves were anticipated.
French President Emmanuel Macron said on Sunday that freedom of navigation through the Strait of Hormuz must be restored as soon as possible. Macron also urged Iran’s president to immediately halt what he described as unacceptable attacks against countries in the region, including Lebanon and Iraq.
Traders are now focusing on the ECB’s upcoming policy meeting, where President Christine Lagarde is expected to outline how the central bank intends to address inflationary pressures linked to the conflict.
Meanwhile, the EUR/JPY cross could face additional headwinds as the Japanese Yen (JPY) finds support on expectations of potential foreign exchange intervention by Japanese authorities. Finance Minister Satsuki Katayama said the government is closely monitoring currency movements and stands ready to take strong action if necessary.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
- EUR/USD holds positive ground around 1.1450 in Monday’s Asian session.
- The pair keeps the bearish vibe below the key 100-day EMA, and the path of least resistance is to the downside with oversold RSI momentum.
- The first upside barrier to watch is 1.1510, and the initial support level emerges at 1.1415.
The EUR/USD pair recovers some lost ground to near 1.1450 during the Asian trading hours on Monday. Nonetheless, the potential upside for the major pair might be limited, as escalating conflict in the Middle East could boost safe-haven currencies such as the US Dollar (USD) against the Euro (EUR).
US President Donald Trump claimed over the weekend that “many countries” would send warships to the region before publicly urging a string of countries to do so. Trump further stated that the North Atlantic Treaty Organization (NATO) faces a “very bad” future if US allies fail to assist in opening up the Strait of Hormuz.
Traders brace for the US Federal Reserve (Fed) and the European Central Bank (ECB) interest rate decisions later this week. The Fed is widely expected to hold the interest rates at 3.50%–3.75% on Wednesday, but energy-driven inflation risks are dampening hopes for future rate cuts.
Swaps pricing indicates markets expect the ECB to tighten monetary policy faster than previously thought. The ECB is now seen hiking as soon as June, according to LSEG data.
Technical Analysis:
In the daily chart, the near-term bias of EUR/USD stays bearish as spot holds well below the 100-day exponential moving average, which has started to flatten after a prior topping phase, while price has broken beneath the lower Bollinger Band in recent sessions and now tracks along the downside of the envelope. The RSI hovers in oversold territory after sliding from mid-range readings, confirming strong downside momentum and suggesting sellers remain in control, even as the pair trades stretched below its 20-day Bollinger midpoint near 1.1700.
Initial resistance emerges at 1.1510, the latest recovery high, followed by stronger supply around 1.1620, where the 20-day Bollinger middle band and the 100-day EMA converge into a cap. On the downside, immediate support is located at 1.1415, the recent closing low, with a break exposing the next bearish target near 1.1360, derived from continuation along the current lower Bollinger Band trajectory. As long as EUR/USD remains capped below 1.1620, rallies are expected to attract selling interest, keeping focus on lower supports.
(The technical analysis of this story was written with the help of an AI tool.)
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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