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What is the Euro to Dollar (EUR/USD)?
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 risk, 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, 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 Eurozone (and changes to that list)
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.
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:
Range Trading: Range trading involves identifying areas of support and resistance within which EUR/USD fluctuates. Traders employing this strategy will buy near support levels and sell near resistance levels, aiming to profit from the price oscillations within the range.
A widely traded currency pair is the relation of the euro against the US dollar, designated as EUR/USD. The quotation EUR/USD 1.2500 means that one euro is exchanged for 1.2500 US dollars. Here, EUR is the base currency and USD is the quote currency (counter currency).
1. Kuwaiti dinar. Known as the strongest currency in the world, the Kuwaiti dinar or KWD was introduced in 1960 and was initially equivalent to one pound sterling. Kuwait is a small country that is nestled between Iraq and Saudi Arabia whose wealth has been driven largely by its large global exports of oil.
A cross rate is a foreign currency exchange transaction between two currencies that are both valued against a third currency. The U.S. dollar (USD) is the currency that's usually used in foreign currency exchange markets to establish the values of the pair being exchanged.
The cross rate should equal the ratio of the two corresponding pairs. Therefore, EUR/GBP = EUR/USD divided by GBP/USD, just like GBP/CHF = GBP/USD x USD/CHF.
All in all, Tuesday, Wednesday and Thursday are the best days for Forex trading due to higher volatility. During the middle of the week, the currency market sees the most trading action. As for the rest of the week, Mondays are static, and Fridays can be unpredictable.
Intraday bias in EUR/USD stays neutral and further rise is in favor as long as 1.0871 minor support holds. Break of 1.0947 will target 100% projection of 1.0601 to 1.0915 from 1.0665 at 1.0979. However, firm break of 1.0871 will turn bias to the downside for deeper fall to 55 D EMA (now at 1.0809) and possibly below.
The popular time to trade EUR/USD is when European and US trading sessions overlap. It often trades with the highest liquidity and volatility between 1pm and 4pm GMT. Economics, geopolitics and central banks all move EUR/USD.
This decline in the euro's strength can be largely attributed to a pronounced discrepancy in monetary policies pursued by the European Central Bank (ECB) and the US Federal Reserve (Fed), resulting in a widened spread of their government bond yields.
The EUR/USD is expected to trade at 1.06 by the end of this quarter, according to Trading Economics global macro models and analysts' expectations. Looking forward, the agency's EUR/USD forecast for the next 12 months is 1.03.
Cross rates, also known as cross currency rates, are exchange rates between two different currencies, where neither currency is the United States Dollar (USD). These rates help determine the value of one currency in terms of another currency directly, without involving the USD as an intermediary.
The cross rate should equal the ratio of the two corresponding pairs. Therefore, EUR/GBP = EUR/USD divided by GBP/USD, just like GBP/CHF = GBP/USD x USD/CHF.
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