Technical analysis and trading recommendations - https://fxpcm.com/en/fx/eurusd-interest-rate-eurozone-21072016
Economic prospects for the Eurozone after the referendum held in Great Britain have deteriorated significantly. Now that the risks for the economy of the Eurozone have increased significantly, market participants expect the expansion of the quantitative easing program.
Today (11:45 GMT) will take place on the publication of the ECB's decision on interest rates in the euro area, and a little later (12:30 GMT) - press conference of the ECB. Today's meeting will be the first after the referendum in the UK. Earlier, Mario Draghi offered to be patient and wait for the positive results of the ongoing ECB policy of extra-soft, now the economic situation in the euro area has deteriorated. Even last month, Mario Draghi stated that as a result Brexit Eurozone GDP growth over the next three years will be reduced by 0.5 percentage points.
In the Eurozone there is a slowdown in economic growth. Thus, according to data presented on Wednesday from the ZEW institute, the index of business expectations for the Eurozone in July, which came out with a value of 14.7, was at its lowest level since November 2012. The index of economic expectations in Germany in July, -6.8 versus 19.2 in June, the current conditions index in Germany in July to 49.8 against 54.5 in June. As the president of the ZEW institute, the main reason for the deterioration of sentiment - the uncertainty of the effects of Brexit.
According to ECB data presented, the surplus of the current account balance of payments of the euro area in May declined to € 30.8 billion (34.0 billion US dollars). In April, the surplus was at € 36.4 billion.
At the same time against the backdrop of strong US data to improve the chances of the Fed rate rise in September. Today futures on interest rates Fed indicate a 25% chance of a rate hike in September. The probability of a rate hike in December is already 43%. As the probability of the Fed raising interest rates before the end of the year the dollar strengthened on the foreign exchange market.
Thus, the fundamental factors speak in favor of a further weakening of the EUR / USD in the medium term.
However, comments by ECB President Mario Draghi may cause increased volatility in the currency market, and in the EUR / USD pair may experience a sudden movement, and, in any direction, it is necessary to take into account today when making trading decisions.