Expert opinions diverged: What determines the EUR / USD rate now?

According to some experts, the difference in interest rates of the ECB and the Fed is no longer the decisive factor in the change in the value of the euro against the dollar.

"In order to predict the dynamics of the euro against the dollar, traders must now monitor the flow and outflow of capital in the stock market," said Mark McCormick, currency strategist at TD Securities.

McCormick said that the euro may strengthen if the outflow of funds from European stocks slows down.

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According to Bloomberg, European funds traded on US exchanges (ETFs) experienced an outflow of capital from the eurozone in the amount of $ 859 million in 2019.

The euro also suffered losses this year as it plunged by almost 2.1% against the dollar.

"The slowdown in the global economy is putting pressure on stock prices. Here, we should also add the weakness of the Chinese economy, as well as trade disputes between Washington and Beijing", said McCormick.

In early March, the Asian empire promised to adopt a wide package of incentives aimed at overcoming economic weakness. At the same time, the euro area will receive the biggest fiscal stimulus in a decade.

In addition, if the United States and the PRC ultimately conclude a trade agreement, firstly, this will weaken investors' concerns about a slowdown in global growth, and secondly, it will contribute to the restoration of such major sectors of the European economy as banking and automobiles.

"The eurozone is now in the process of stabilization. It may take two to three months of positive statistical data to change the psychology of the market. Most likely, this will happen in the third quarter", said McCormick.

Meanwhile, an analyst at Jefferies Group, Brad Bechtel, believes that the difference in interest rates between the ECB and the Fed is still not to be written off. Although at the moment, a combination of threats related to Brexit serves as a factor in determining the direction of the EUR/USD pair and common European political fears.

He expects that in the summer, the weakening of the dollar will begin to gain momentum and the euro will rise to $ 1.16 in value.

The material has been provided by InstaForex Company - www.instaforex.com