Overview, Knowing the Euro, Factors affecting the EU economy and the Euro

Knowing the Euro

The Euro is well known for its high liquidity. It is directly in competition with the US$ and appreciates against the USD whenever the US economy performs poorly. EUR/USD is the most liquid pair today. The strength or weakness of other world currencies is judged based on their rally against the Euro. The limited experience of the ECB (1999-till date), and the Euro's susceptibility to economic & political instability of any single member country are considered as its negatives.

The future EUR/USD exchange rates are predicted by comparing the interest rates offered by the 10 year US govt. bonds and the German govt bunds. A higher value of Euro interbank rate (Euribor-3 month interest rate) tends to appreciate the Euro, and Takeovers & Mergers of EU companies by multinationals also affects the exchange rate of the Euro in the short term.

Overview, Knowing the Euro, Factors affecting the EU economy and the Euro