The first half of the year is over. The economists of commerzbank review the evolution of the EUR/USD since the beginning of the year.
If inflation subsides again, it will no longer be so clear how central banks should act
The EUR/USD pair showed an unusually regressive evolution during the first half of the year. In other words: in case of high prices the downward trend dominated, in case of low prices the upward trend. To prevent anyone from making this a trading rule to be used in the future, let me warn you, the fact that EUR/USD behaved like this during the first half does not mean that the pair will follow a similar pattern during the next 6 months.
If inflation subsides again, it will no longer be so clear how central banks should act. Should interest rates go down or stay at them for some time? If you lower interest rates, how fast should you do it? Much more permanent differences could emerge and give EUR/USD a longer lasting boost. At that point, the reversion to the mean will have ended.
For those who hedge EUR/USD risks over the medium term, the first half of the year was not a particularly profitable time for hedging with the help of options. You pay an option premium that is based on relatively high volatility and not particularly small range. My message is, don’t let this experience give you the impression that it will always be this way. The root causes of this pattern should disappear.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
