ECB to Discuss Inflation Worries

We Have to Make all the Right Decisions

The European Union has received a great deal of scrutiny over the last several months. With England voting to leave the EU, many individual economies within the Eurozone struggling with debt, and a failure of the euro to perform at the levels that were expected of it, the EU has struggled much more than they would have like on an economic front. Unfortunately, there is more worry coming out of the Eurozone. As central bankers look at fiscal health, they are finding that inflation is not occurring at a healthy level, and this has many wondering about the overall health of the Euro Area.

For the month of August, consumer prices in the Euro Area rose by 0.2 percent in comparison to the August before. The estimate was that prices would have risen by 0.3 percent. This is a tiny difference, at first, but it indicates that inflation is not occurring as quickly as the European Central Bank would like to see, and that can be indicative of a whole host of other economic problems for the EU.

The obvious takeaway that traders should see here is that the euro isn’t gaining as much as ECB officials expected it to. This means that the euro is far weaker right now than it could be compared to other major currencies, and it means that economic policies are likely to change in order to bring the price of the euro up. If you are a Forex or binary options trader, this means that not only should you be looking at technical and fundamental data to make your trading decisions, you should also be paying more attention to the news and what sort of policies are being discussed or put into play in order to strengthen the euro. Once a good policy kicks into gear, it is very likely that you will want to switch from a position of shorting the euro to going long. If you are a binary options trader, you will want to switch from trades that indicate the euro will drop to trades that predict a comparative rise in price. The only way that you will be able to anticipate this with a degree of accuracy is to pay attention to news out of the EU and ECB decisions.

Inflation is one of the key metrics that all central banks look at when attempting to decide what the best monetary policy is for a nation. This isn’t something that’s unique to the EU; the U.S. Federal Reserve looks at this as one of the main determining factors for helping them to determine when to raise or lower rates. Inflation is often viewed as a bad thing, but in reality, it is a necessary part of growth in today’s economy. Most central banks look for ideal rates of inflation at around 2 to 3 percent per year, although this varies a bit depending on specific circumstances. In order to get closer to this number, there is a good chance that more stimulus packages will be implemented. These have had a various degree of success, but they can work very well at times. So, you should not only be paying attention to the news, but following up regularly in order to know exactly how the news is playing out long term.

The ECB is meeting during the first full week of September, and you can expect that this will be one of the biggest questions that is discussed. The euro zone has faltered even more since the Brexit, and correcting this will be of the highest priority. Pay attention, and be ready to act immediately on useful information that emerges.

Categories: Economy
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