The European Union is made up of 28 countries, which have a population of more than 500 million people and a GDP of more than $18.8 trillion. The region is known for its strong industrial base, protective regulations, and the peaceful co-existence.
Over the years, there has been criticism on whether the concept of European Union is a good one. EU believers believe that it is a good model because it connects more than 28 countries and creates an open market for goods. Critics on the other hand argue that the concept is flawed. First, the monetary policy decision is made at the EU level and not the national level. Therefore, a country like Italy cannot make its own monetary policy decision to respond to internal issues. For example, if inflation rises, the Italian central bank cannot hike rates.
Second, EU members cannot negotiate their own deals with other countries. All trade negotiations must go through the European Union, which tends to disadvantage small countries like Estonia. Third, while there is free movement in the region, people still retain their national heritage. For example, an Italian living in Germany views themselves as an Italian and not a European. This is because they don’t have the same rights as those of other Germans. For example, they cannot vote. This is different with what happens in the US, where one can move from one state to another and vote. There is also a language barrier, with all member countries having their own national languages. All these factors have made the European economies underperform compared to the United States.
Today, traders will receive the inflation numbers from the EU. The data is expected to show that the CPI remained unchanged in May at 1.2%. On a MoM basis, the CPI is expected to have declined from 0.7% to 0.2%. The core CPI, which excludes the volatile food and energy products is expected to have remained unchanged at the 0.8% level. On a MoM basis, the core CPI is expected to have remained unchanged at 0.9%. Meanwhile, the region’s trade surplus is expected to have narrowed down from 22.5 billion euros to 8.8 billion euros in April. In Germany, the ZEW economic sentiment in June is expected to have declined to -5.7 from the previous -2.1.
In the past one year, the EUR/USD pair has been on a downward trend. As of this writing, the pair was trading at 1.1237 level, was a continuation of the downward trend. Today, the pair will likely react to the EU CPI data and the US building permits data. The big move will likely happen tomorrow after the Fed releases its interest rates decision.
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