Euro/USD rates may rise ahead of the Jackson Hole Economic Symposium that is to be held in Wyoming from July 8 to 14. This time, as always, many traders are already anticipating that the US dollar will lose value when the summit is near. They are watching for a high-profile event that will cause the USD/JPY to appreciate against the euro and they anticipate that this will be the time for them to take their profits.
The economic outlook and the political situation in the US can both affect the EUR/USD rates ahead of the Jackson Hole Economic Symposium. The euro may depreciate against the US dollar in anticipation of a possible tax increase in Washington.
As there is no indication yet that the US government will increase taxes on the citizens, one of the reasons why the euro may depreciate is that the European Central Bank is going to be tightening its monetary policy. According to Bloomberg, the European Central Bank (ECB) may decide to raise interest rates and even implement a negative deposit rate in its effort to reduce the quantity of credit that is granted out to banks. This move, Bloomberg pointed out, may push the euro higher against the USD and lower against the Swiss Franc.
While some traders anticipate the EUR/USD rates to go up during the Jackson Hole Economic Symposium, some other traders believe that they are going to be in a state of decline for quite some time. The EUR/USD will likely remain relatively flat for the next couple of weeks, according to some experts. This would indicate that there is a lot of uncertainty about what the governments of Europe are doing. The fact that the governments of France and Germany will probably be unable to agree with each other on how to solve the debt crisis will also not help the EUR/USD rates in this case.
For a long time, the Euro has been going down against the US dollar. Even though there is no sign of a tax increase that would cause the Euro to depreciate, the European Central Bank has been trying to stimulate the economy by providing liquidity to banks so that they can lend more money to people. Since this liquidity is needed to finance the government’s spending, it is not surprising that the Euro has depreciated a bit.
One of the reasons why many traders are anticipating that the EUR/USD rates may rise ahead of the Jackson Hole Economic Symposium is because of the upcoming meetings of the G-7 in Japan. These meetings are to be held between Japanese prime minister Junichiro Koizumi and US president Bill Clinton. The two leaders have promised to discuss the global economic situation and will likely discuss the possibility of a new global economic framework. In addition, the two world leaders will also be discussing the possibility of Japan joining the Trans-Pacific Partnership and the World Trade Organization.
The governments of Japan and the US are expected to work together in order to make their respective economies more competitive and to avoid a possible slowdown of the global economy. In particular, the Japanese economy depends on exports and the US economy relies on imports. There are reports that the US is on the verge of slowing down its exports because the economic situation is becoming tighter with every passing day.
The rise in the EUR/USD may also be expected if there is a sudden drop in the Japanese yen or if the US Federal Reserve decides to begin increasing interest rates. It may also be expected if the Federal Reserve decides to raise interest rates again in order to support the economy and stop the decline of the dollar. However, these factors may cause an abrupt increase in the EUR/USD rates at the same time as there is an upward pressure on the pound sterling.