|Member Sentiment Bearish|
Live and Historical EUR/USD Rates
The above chart represents the value of the Euro against the dollar - how many dollars are needed to purchase one Euro. At its introduction, the Euro fell against the dollar, but in 2003, the Euro surpassed the value of the dollar. Sometimes called "fiber" because of the transatlantic cable, this is certainly a major pair - the largest in forex trading.
Since its introduction in 1999, the Euro has become the currency of 21 European countries for a total of 327 million people. The Euro holds the highest volume of economic value circulated in any world currency and it is also the second largest reserve currency and second most traded, after the dollar. The Euro is controlled by the European Central Bank (ECB) in Frankfurt, though the bank has not typically exercised significant control. The Euro is strongly impacted by exports, as well as the primary industries in the Eurozone: services, agriculture, and tourism.
The U.S. Dollar
The U.S. dollar is the most common currency in international transactions, used both in the United States and several other countries. A number of currencies are also pegged to the dollar. The value of the dollar is strongly controlled by the Federal Reserve, which makes adjustments primarily through lending interest rates. However, it is a floating currency and value is apparent in consumer price indices or other major measures. The dollar is also the primary reserve currency, though in 2007, Alan Greenspan commented that it is entirely possible that the euro will replace the dollar in this role. Significant sectors in the American economy include energy, agriculture, manufacturing, and finance.
The EUR/USD pair is the most commonly traded major pair. Naturally, any factors that influence either economy affect the pair, as well as the differential between the interest rates at the ECB and Fed. The pair also has a negative correlation against the USD/CHF and a positive correlation with the GBP/USD pair. This is because of a strong positive correlation between the Euro and the Swiss franc or the British pound-a natural correlation given their close economic ties. It is not as common for this pair to be used for carries, since both currencies tend to be relatively stable.
Read about the tag team of Bernanke and Draghi here.
August 16, 2010 at 4:07 PM • Comment
AUDUSD traded off substantially last week, with the sharp drop exacerbated by slowing import numbers out from China that indicated a potential future slowdown in the global economy and also raised risk aversion in the forex market. The week...Read More
August 16, 2010 at 4:01 PM • Comment
The Greenback roared back last week on renewed risk aversion in the currency markets along with the FOMC's surprise plans for the Fed to reinvest agency loan repayments it was receiving into long term Treasuries. The Fed's new...Read More
August 16, 2010 at 11:28 AM • Comment
Last week, the euro and pound both had their largest single week declines since the height of the EuroZone Debt Crisis as the euro dropped about 600 pips and the pound dropped about 500 pips. Look at the...Read More
August 13, 2010 at 2:14 PM • Comment
We have had some positive news today, not only in the U.S. but also in Germany (where exports and invesment growth were led to a very favorable reading) and France where GDP numbers came much better than expected....Read More
August 13, 2010 at 9:35 AM • Comment
The incredible rally in the U.S. Dollar may gain even more momentum today as several key pieces of economic data are set for release at 8:30 am est. This week has seen the largest weekly decline in the...Read More