The EUR/USD pair is the most
popular and liquid currency pair in the world. This is because it is made up of
the two largest economies and most connected countries in the world. The United
States and the European Union have a GDP of more than $20 trillion and $17 trillion
respectively. The two regions are also very related in terms of business.
Indeed, the combined annual trade of almost $700 billion.
In the past few weeks, the
EUR/USD pair has declined sharply from a high of 1.1515 and today, the pair
reached a low of 1.1315. The decline of the pair comes at a time when investors
are increasingly worried about the weakness in the European economy. Indeed,
the latest data show that the region’s economy is weakening at a faster rate
than earlier expected. Just last week, the European commission lowered the
guidance for the economy from 1.7% to 1.3%. Italy, one of the biggest economies
in the region is currently going through a recession. This has raised the
probability that the ECB will not follow through with the announced rate increases.
In the United States, the economy
too is going through a slowdown. After peaking at 4.2% in the second quarter of
last year, the economy grew by 3.5% in the third quarter and is expected to
have grown by 2.6% in the fourth quarter. The Federal Reserve has also started
to warn about the pace of future rate hikes.
Even with all this, investors seem
to prefer the US dollar between the two currencies. This is because the country
continues to release good numbers. For example, the jobs numbers released this
month showed strong jobs numbers. They also believe that the Fed still believes
in the rate increase policy only that it was criticized by key scholars and
other important figures. Therefore, there is a likelihood that the EUR/USD pair
will continue moving lower.
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