Sunday, November 5, 2017

What is the Current Exchange Rate Outlook between the Euro and the Dollar?

The macroeconomic developments of the year 2017 have been deeply influential in relation to the United States dollar and the euro. As the most active foreign exchange currency pair, EUR/USD has become a yardstick of the global economy due to the quantitative easing programs respectively enacted by Federal Reserve and the European Central Bank; to this effect, the ECB’s late October decision to extend its QE program has pretty much defined the outlook of both currencies for the rest of the year.

A Weaker Euro

The euro had been holding steady over the summer and even as the weather turned cooler; however, it started losing ground in mid-October as many analysts believed that the ECB directors would vote to keep QE in place. 

The European economies are in the clear with regard to the debt crisis; however, full economic growth has not been reached and there are questions related to ongoing issues in the United Kingdom and Spain. As a result, EUR/USD lost about 1.44 percent.

A Stronger Dollar

The greenback finished October at higher levels than expected thanks to positive reports related to the American economy. Wall Street has performed very strongly in 2017, and the economic recovery over the last few years has continued at a gradual pace. 

Economic growth in the third quarter stood at three percent, half a percentage point better than expected.

The Brexit Factor

The United Kingdom has made little progress in the Brexit talks to exit the European Union. If British leaders start softening their Brexit stance for the purpose of taking advantage of the single market, both the euro and the pound sterling will likely post gains. 

At any rate, the Brexit negotiations will probably continue well into 2018, and there will be room for the pound and euro to gain value on positive news.

Converting Dollar Reserves

Governments, banks and even individuals around the world have been increasing their dollar reserves in 2017, and they have been doing so in anticipation of the current situation. 

Some companies, like Continental Currency Exchange, know that analysts believe that USD reserves may be paired down from now until late December. Institutions and individuals are taking advantage of favorable currency exchange rates. 

As long as investors continue to react positively to earnings reports issued by companies listed on the S&P 500, Wall Street will keep its bullish run, particularly if employment numbers are positive, and this means a stronger dollar.

In the end, the USD will likely hold an economic advantage over the euro in the months to come; however, this outlook could be slightly reversed if dollar reserves around the world are converted into profits.

1 comment:

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