Modern investors have a difficult time retaining a competitive edge without having the latest technology at their fingertips. Predictive analytics technology has become essential for traders looking to find the best investing opportunities.
Predictive analytics tools can be particularly valuable during periods of economic uncertainty. Traders can have even more difficulty identifying the best investing opportunities as market volatility intensifies.
Predictive Analytics Helps Traders Deal with Market Uncertainty
We have talked about a lot of the benefits of using predictive analytics in finance. We mentioned that investors can use machine learning to identify potentially profitable IPOs.
However, predictive analytics will probably be even more important as global uncertainty is higher than ever. Traders will have to use it to manage their risks by making more informed decisions.
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As time goes by the global financial crisis intensifies more and more. Because of that, the inflation rate among the major countries continues to increase. This is the result of several factors, and one of the main ones is the war between Russia and Ukraine. As a consequence of the ongoing conflict, the price of stocks and commodities decreases, which has a dramatic effect on other financial markets, including the forex market.
Compared to the Spring Forecast, Russia’s action against Ukraine continues to harm the EU economy, causing weaker growth and greater inflation. The EU economy is expected to increase by 2.7% in 2022 and 1.5% in 2023, according to the Summer 2022 (interim) Economic Forecast. In 2022, the Eurozone’s growth is predicted to be 2.6 percent, with a subsequent slow down to 1.4 percent in 2023. By 2022, annual average inflation is expected to reach record highs, reaching 7.6% in the Eurozone and 8.3% in the EU, before falling to 4.0% and 4.6% in 2023, respectively.
Investors around the world are struggling to deal with these challenges. They have started resorting to predictive analytics tools to better anticipate market movements.
Data developers have come up with a number of different approaches to help forecast stock market prices. According to a study published in Frontiers, predictive analytics algorithms have been able to effectively predict stock market movements during the pandemic based on factors such as search engine use.
Similar predictive analytics algorithms could prove to be equally useful during the current economic crisis. Machine learning algorithms could evaluate socioeconomic trends from around the world to make better forecasts.
Analytics Vidhya, Neptune.AI and a number of other companies have predictive analytics tools specifically for gauging the direction of the stock market. Their services are becoming more poplar as economic uncertainty rises.
Can Predictive Analytics Show What Will Happen With the Euro?
It has been a rough year for the euro, which has lost close to 12 percent versus the US dollar so far this year.
It’s a reaction to both the aftermath of the Russia-Ukraine conflict and the European Central Bank’s hesitant start to raise interest rates (ECB). What will happen to the euro if the ECB decides to stop raising interest rates, which might lead to a drop in the pair? Investors feared that a regional energy crisis would trigger a recession, sending the euro to a 20-year low. On July 12, the euro bounced back. As a result of this, motivation in trading among investors who were dependent on the Euro increased. Because of the Euro decrease, many investors have seen dramatic losses while trading Forex, however, as Euro started to bounce back and rebound in terms of price value, this had a positive effect on the investors’ sentiments.
Since December 2002, the single currency has fallen to its lowest level versus the US dollar since the beginning of the coronavirus epidemic in July because of energy worries, supply constraints, and rate rises from the European Central Bank (ECB).
The Spring 2022 forecast’s many unfavorable risks have come to fruition. As a result of Russia’s incursion into Ukraine, oil, and food commodity prices have risen further. Consumer buying power is being eroded as a result of rising global inflation, prompting central banks to act more quickly than previously anticipated. The negative economic effect of China’s strong zero-COVID policy is exacerbated by the country’s ongoing slowdown in economic development in the United States of America.
Recent months have seen a steady decline in the euro, as inflation has hit a record high and economic growth has dropped to its lowest level since the financial crisis of 2008. There has been some recent evidence that the Eurozone economy is struggling.
Increasing energy and financing costs, as well as high inflation, are the primary causes of economic weakness in the Eurozone. Covid-19 supply chain interruptions and mismatched supply and demand from lockdowns contributed to increased inflation at the beginning of the year. Due to the Russian invasion of Ukraine in February and Western sanctions on Moscow, food, gasoline, and energy costs have risen.
Because the U.S. central bank has a greater capacity to raise interest rates than its international counterparts, the dollar has risen in value.
Fortunately, predictive analytics tools could help traders anticipate the future value of the euro. Annie Qureshi wrote an article for DataFloq that talked about the benefits of using predictive analytics for Forex valuations, which includes forecasting the value of the euro.
Qureshi pointed out that predictive analytics algorithms can forecast asset prices based on large sets of unstructured data from social media and input from world leaders. This has tremendous promise for traders. They can also use predictive analytics for technical analysis trading, although this can be more difficult during periods of economic uncertainty.
Predictive Analytics Technology Can Help Gauge the Future of the Global Economy and Financial Markets
Predictive analytics can anticipate changes taking place in other countries, as well as financial markets. This helps traders get more granular insights into the future of the economy.
The Nord Stream 1 pipeline, Russia’s major conduit to Germany, has begun its yearly maintenance, raising fears that Europe might plunge into a recession. Because of the conflict in Ukraine, governments, markets, and businesses are concerned that the closure may be prolonged.
Because of the EU’s heavy dependence on Russian fossil resources and the slowing global economy, the EU economy is especially sensitive to changes in energy markets. As a result of last year’s resurgence and a stronger-than-expected first quarter, the annual growth rate for 2022 is expected to be higher than originally anticipated. Summer tourism might help, but the rest of this year’s economic activity should remain modest. Quarterly economic growth is predicted to pick up steam in 2023, thanks to a strong labor market, moderate inflation, assistance from the Recovery and Resilience Facility, and the huge amount of surplus savings still available to the country.
So, what will be in the future and how will the Euro’s value develop? There are several opinions about this topic. Compared to the Spring Projection, the inflation forecast has significantly increased. Additionally, European gas prices are expected to rise even more in the third quarter, which will be passed on to consumers via higher power costs. Inflation is expected to reach an all-time high of 8.4% y-o-y in the third quarter of 2022 in the Eurozone, before declining gradually until it drops to less than 3% in the final quarter of 2023 in the EU and the Eurozone. According to analysts, the inflation rate among European countries is going to ease and decrease. In addition to that, other analysts, who are more skeptical, think that the Euro is going to reach the same level as the USD for a long time. After that when the Euro and the USD will reach the same price level for a certain period of time, the Euro is going to decrease in its price level and the USD will become dominant. However, what will be in the future it’s a matter of time. If the situation between Ukraine and Russia doesn’t stabilize, the Euro may drop even more than projected.
Financial traders will be able to use predictive analytics to project the outcome of all of these factors. This can help them make more informed trading decisions.