EUR/USD falls below 1.1000 on ECB
After last week's rate hike from the European Central Bank, traders may wonder why the euro has experienced weakness as a result. Find out why higher rates don't always lead to higher currency demand.
Both the ECB and the US Fed raised interest rates 25 bps last week, yet EUR/USD has fallen below 1.1000 as a result.
Central bank nuances
In the case of the most recent ECB meeting, the language used by Lagarde appeared to outweigh the hike in interest rates. The hike was expected and already priced into the market as a result - Lagarde's dovish tone, however, was not. Unsure of a hike at the next meeting in September, expectations that the Euro Area could leapfrog the US in interest rates appears less likely in the near future.
The US, with interest rates at 5.5%, remains the highest of major economies and is drawing demand from the euro. The UK could close the gap with their interest rate decision later this week.
How to trade EUR/USD
- Open an account to get started, or practice on a demo account
- Choose your forex trading platform
- Open, monitor, and close positions on EUR/USD
Trading forex requires an account with a forex provider like IG. EUR/USD can be found in IG's platform under the 'Major' pairs tab. Many traders also watch major forex pairs like GBP/USD and USD/JPY for potential opportunities based on economic events such as inflation releases or interest rate decisions. Economic events can produce more volatility for forex pairs, which can mean greater potential profits and losses as risks can increase at these times.
You can help develop your forex trading strategies using resources like IG’s Trading Academy. Once your strategy is developed, you can follow the above steps to opening an account and getting started trading forex.
Your profit or loss is calculated according to your full position size. Leverage will magnify both your profits and losses. It’s important to manage your risks carefully as losses can exceed your deposit. Ensure you understand the risks and benefits associated with trading leveraged products before you start trading with them. Trade using money you’re comfortable losing.
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