European Central Bank (ECB) Executive Board member Piero Cipollone said “trade uncertainty could reduce business investment.”
Additional quotes
- The potential for sudden stopping in capital flows, disruptions of payment and volatility in currency markets require stable contingency planning.
- There are additional signs that geopolitical considerations further influence decisions to invest in gold.
- The recent increase in trade uncertainty could reduce Euro business investment area of 1.1% in the first year and GDP's true growth around 0.2 percent points to 2025-26.
- The detected increase in volatility in the financial market may indicate lower GDP growth of nearly 0.2 percent points by 2025.
Market reaction
At the time of writing, the EUR/USD pair dropped by 0.21% during the day, trading near 1.1400, little moved by these comments.
Euro faqs
Euro is the money for 19 European Union countries belonging to the eurozone. This is the second most seriously exchanged money in the world behind the US dollar. In 2022, it costs 31% of all foreign exchange transactions, with an average sun -shift of more than $ 2.2 trillion a day. EUR/USD is the most heavy -exchanged pair of currency in the world, providing approximately 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 Eurozone. The ECB sets interest rates and is in charge of financial policy. The main command of the ECB is to maintain price stability, which means control of inflation or stimulation of growth. Its main tool is to increase or decrease interest rates. The relatively high interest rate – or the hope of a higher rate – usually benefits the euro and vice versa. The ECB Governing Council is making financial policy decisions at meetings held eight times a year. The decisions were made by the leaders of Eurozone National Banks and six permanent members, including ECB president Christine Lagarde.
Eurozone inflation data, which is measured by the coexistence index of consumer prices (HICP), is an essential euphoric for the euro. If inflation rises more than expected, especially if above the target of 2% of the ECB, it forces the ECB to raise interest rates to restore it under control. The relatively high interest rate compared to its counterparts can usually benefit the euro, as it makes the region more attractive as a place for global investors to park their money.
Data has released economic health and may affect the euro. Indicators such as GDP, manufacturing and service PMIS, work, and consumer sentiment surveys can influence the direction of single money. A strong economy is good for the euro. Not only does it attract more foreign investments but it can encourage the ECB to put interest rates, which directly strengthens 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 economy.
Another significant release of data 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 at a given period. If a country produces highly sought exports then its money gets value from excessive demand created from foreign buyers who seek to buy these goods. Therefore, a positive balance on the net trade strengthens a money and vice versa for a negative balance.
