Many experts predict that 2017 will be a monumental year for the USD/EUR currency pair, with a number of big events set to drive changes in value. There is a January effect in the market already, with the currency pair historically experiencing its highest or lowest price for the year in this month.
Given the tumultuous year that 2016 was, this means that if January is the highest month for the USD/EUR then it can be expected to fall well below par by the end of 2017. So far it has remained jittery and depending on various upcoming events it could strengthen. Here’s what’s is currently and will soon influence its value.
The inauguration of Donald Trump as the 45th President of the USA has left many markets unsure of what to expect. In the run-up to the election there were many claims that a Trump victory would crash the markets, but in the end, there was a general dip due to uncertainty but nothing as bad as expected.
For this reason, his impact is unknown. Already Trump has shown in other markets that there can be big swings based on comments he makes, such as commenting that the US dollar was too strong leading to fluctuations in the stock market. If this continues then the dollar could easily fall against the euro, or strengthen depending what he says and does.
ECB and Inflation
On the other side of the Atlantic, actions (or inactions) of the European Central Bank (ECB) play a big part in the USD/EUR value. At aa recent press conference the ECB president said the bank saw no upwards trend in underlying inflation, with a lot of their next moves dependent on the impact of Trump.
For December Eurozone inflation figures met expectations and in January investor confidence was up as well. If there is a weaker US dollar then 2017 could be strong for the euro and offer a good investment for forex traders. However, other factors such as employment levels, manufacturing and other political situations could change.
One of the biggest stories from 2016 was the UK’s decision in its June referendum to leave the EU. By the end of March 2017, it is expected that Brexit will have been triggered and negotiations underway for the UK to formally leave. The pound dropped to its lowest levels in 30 years when the Brexit result was announced, impacting the euro and US dollar too, so when it is officially underway the effect could be huge.
A lot will depend on what is agreed in the Brexit negotiations, as the UK leaving or remaining in the single market could be pivotal. For the USD/EUR, a weakened pound again will likely see the US dollar strengthen while the euro could go either way.
Brexit and the new US president are still surrounded by much uncertainty as to what their impacts will be, but there are some other events which could affect the USD/EUR pair. Elections are set for France, Germany and The Netherlands which could all impact upon currency values, while there are bound to be some surprise events which occur across both continents.
For those trading the USD/EUR pair it looks like it will be an exciting 12 months ahead, starting with a jittery first month.
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