Most Important Fundamental Factors That Influence EUR/USD

EUR/USDEUR/USD is the most traded currency pair among the traders from all the corners of the world including Singapore. As Europe and USA are the biggest world economical zones, there are many factors influencing EUR/USD currency pair that make it the most volatile and active in the Forex market. For that reason Forex traders see a lot of trading opportunities here and most of the Forex brokers offer the lowest spreads for EUR/USD due to its popularity. In this article we will discuss some fundamental factors that influence on the rate and movements of the EUR/USD currency pair and will help you predict its rates changes.

The Monetary policy on EU is regulated by the European Central Bank (ECB). The main target of ECB is the price stability. The price stability is preserved if the increase of the Harmonized Index of Consumer Prices is not more than 2%. Every second Thursday of the month, the board of ECB announces the interest rates. During the first meeting of each month the ECB gives a press conference where it clarifies the perspective of the overall economy and monetary policy in particular. The best indicator for the pair EUR/USD is the difference between the rate of US Funds and the refinance rate of ECB.

German economical data is the most important in the Euro zone, as Germany is the EU’s largest economy. The most influential data is the gross domestic product, unemployment, industrial production, inflation, etc. Also one of the most important indicators in Germany is the Business activity – an overview of IFO. Other non-European countries may also affect the price changes of the EUR/USD currency pair. Strong trends of EUR/CHF and EUR/JPY may course the volatility for EUR/USD. For example EUR/USD may go down in the background of strong positive news from Japan which first results the decrease in a rate of EUR/JPY.

There is a strong correlation between EUR/USD and USD/CHF that consists in some similarities between the Swiss Franc and the Euro. The reason is very simple, as the Swiss economy is heavily dependent on the economy of EU. The reduction of EUR/CHF rate often predicts or accompanies the reduction of EUR/USD. As any other currency pair, EUR/USD responds to political instability, such as coming to power a coalition government in Germany, Italy or France. Political or financial turmoil in Russia also have a negative impact on EUR/USD as the German business has made significant investment in the Russian economy.

Watching the behavior of EUR/USD you can find out many more factors that may influence this currency pair. The main ones mentioned in this article can be found in the Economical Calendar that will show you the date, importance and the result of any economical or political announcement for the major world currencies. Fundamental analysis is a great way to plan your Forex trading for EUR/USD and other currency pairs whether you are located in Singapore or any other country in the world.

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One comment on “Most Important Fundamental Factors That Influence EUR/USD
  1. eastlandgrl says:

    interesting, thanks

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