Should I be bullish on the euro because of 1.5% interest rate?

The U.S. has set its fed rate at 0-0.25%. The ECB has its rate set at 1.5%. Is this enough reason to be bullish on the euro? Because of the macro problems in the eurozone I want to be bearish on the euro, but the interest rate differential is holding me back.

Interest rate differences are one of the key factors for driving prices. Everything else is less important. Though, that’s just the long term outlook. Short and medium term several other factors come into play.

Here you can see the interest rate differential between USA and Europe. Between 2005 and 2008 USA had the highest interest rate but the euro didn’t fall. In my opinion you shouldn’t be bullish on a currency just because the country has a higher interest rate but if a country has a high interest rate + high inflation + a rising GDP then that might be possible buy.

USA money printing and debt the primary reason for euros good performance post GFC, responsible for good performance of late

us debt >100% of GDP

I can’t read the details of that chart exactly, but it appears that the dollar actually strengthened from 05 to 06 when the interest rate differential was increasing; and the dollar weakened from 06 to 08 when the interest rate differential was going back to zero.

we are expecting for the bullish in EURUSD…but let us c

I think that being bullish on the euro these days is a very high risk. In spite the fact that the interest rate is higher than it is in the US, the debt problem in Europe is so severe that there is actual threat on the existence of the Eurozone. I also believe that one day in the following months, we will all wake up and find out that Greece declare for bankruptcy. I would not want to hold the EUR in this kind of a day…

Why would you want high inflation rates in your currency you invest in, wouldn’t that mean the value of the
currency goes down?

If the inflation raises, the rate of the currency should go down and if you have a long position it will not help you- the oppositeis correct. Likewise, it is bad for the currency’s economy.

Hi guys,

Im completely new to this can someone please help me to understand, what is an interest rate? Where can i find this info? What is inflation ? Again where can i find this info? Etc

Thanks guys, sry 4 being such an amateur , lol.

Thanks :slight_smile:

Hi kay07949,

Here’s the definition and detailed information about interest rates Wikipedia

And here’s the article about inflation Wikipedia

Also you can read “Principles of Economics” written by Gregory Mankew, this book is very good.