The Euro to Dollar exchange rate (EUR/USD or €/$ for short) is the amount in U.S. dollars that equals 1 Euro. It is the convention for quoting the exchange rate between the two currencies. This guide will provide an overview of the factors that impact the FX rate, currency riskCurrency RiskCurrency risk, or exchange rate risk, refers to the exposure faced by investors or companies that operate across different countries, in regard to unpredictable gains or losses due to changes in the value of one currency in relation to another currency., and what investors and speculators need to know.
Factors that Impact the Euro to Dollar Exchange Rate
The exchange rate for the Euro to Dollar is impacted by many economic factors,EconomicsCFI's Economics Articles are designed as self-study guides to learn economics at your own pace. Browse hundreds of articles on economics and the most important concepts such as the business cycle, GDP formula, consumer surplus, economies of scale, economic value added, supply and demand, equilibrium, and more as well as political events on both sides of the Atlantic. A summary of factors that impact each country is listed below.
Factors impacting the Euro side of Euro to Dollar:
Countries that are included in the EurozoneEurozoneAll European Union countries that adopted the euro as their national currency form a geographical and economic region known as the Eurozone. The Eurozone forms one of the largest economic regions in the world. Nineteen of the 28 countries in Europe use the euro (and changes to that list)
European Central BankEuropean Central BankThe European Central Bank (ECB) is one of the seven institutions of the EU and the central bank for the entire Eurozone. It is one of the most critically important central banks in the world, supervising over 120 central and commercial banks in the member states. (ECB) monetary policy
Employment rates, job creation, etc.
Budget deficits and national debt levels in Eurozone countries
Factors that impact the Dollar side of Euro to Dollar:
U.S. Gross Domestic ProductGDP FormulaThe GDP Formula consists of consumption, government spending, investments, and net exports. We break down the GDP formula into steps in this guide. Gross Domestic Product (GDP) is the monetary value, in local currency, of all final economic goods and services produced in a country during a specific period of time. (GDP) growth rates
Interest rates set by the Federal Reserve (the “Fed”)
Money supply set by the Fed
Unemployment ratesCyclical UnemploymentCyclical unemployment is a type of unemployment where labor forces are reduced as a result of business cycles or fluctuations in the economy, such as recessions (periods of economic decline). When the economy is at its peak or has continuous growth, the rate of cyclical unemployment is low
Trade agreements, tariffs, and duties set internationally
The balance of paymentsBalance of PaymentsThe Balance of Payments is a statement that contains the transactions made by residents of a particular country with the rest of the world over a specific time period. It summarizes all payments and receipts by firms, individuals, and the government. account
Total US national debt and annual budget deficits
Events in the White House
Consumer savings and household income rates
Social Security and Medicare
History of the Euro to Dollar Exchange Rate
The chart below shows the Euro to Dollar exchange rate during the past ten years, spanning from 2008 until 2018. You will notice that the FX rate has ranged between 1.039 and 1.598 during that time period. That range is basically from near parity – almost a 1:1 exchange rate – to approximately $1.60.
Source: xe.com
From 2008 to 2014 the Euro was rarely worth less than 1.3 US dollars, however, between 2014 and 2015 it dropped all the way down to about 1.04. For three years, the FX rate remained relatively range bound between 1.04 and 1.15 until breaking out above 1.22 in early 2018.
Additional Resources
Thank you for reading this guide to understanding the Euro to Dollar exchange rate, factors that influence it, and the history over the past 10 years. To continue learning and advancing your career, these additional resources will be helpful:
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