Euro (EUR)

The Euro (EUR) is the shared currency across the 19 states that make up the Eurozone. It’s the world’s second-largest reserve currency and second most-traded currency after the US Dollar (USD).

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Key Info

Currency code: EUR
Currency symbol: € (Euros), c (cents)
Nickname: The single currency
Affiliated central bank: European Central Bank (ECB)
Key currency pairings: GBP/EUR, EUR/USD

Denominations:

Coins: 1c, 2c, 5c, 10c, 20c, 50c, €1, €2
Notes: €5, €10, €20, €50, €100, €200, €500

Where is the Euro Used?

The Euro is the official currency of the Eurozone, which comprises 19 of the 27 EU member states, including Germany, France, Italy and Spain. It’s also used in Andorra, Monaco, San Marino, the Vatican, Montenegro and Kosovo, as well as in the British Overseas Territory of Akrotiri and Dhekelia and in several special EU territories.

Around a dozen currencies around the world – including in Europe, Africa and Oceania – are pegged to the Euro, meaning their value is tied to the value of EUR.

What Affects EUR Exchange Rates?

A number of different factors affect the Euro, and not all of these stimuli are set in stone.

For instance, prior to the war in Ukraine the Euro was viewed as a safe-haven currency; this means investors would buy the Euro in times of uncertainty. Since Russia’s invasion, EUR seems to have lost its safe-haven status (at least temporarily).

However, there are three key things that tend to be reliable triggers of EUR movement.

European Central Bank (ECB)

The European Central Bank governs monetary policy in the Eurozone. Policymakers meet every six weeks to decide on monetary policy, which can have a big effect on the value of the Euro.

The most important policy decision is the interest rate. Generally speaking, when the ECB raises interest rates the Euro will rise; if it lowers interest rates, the Euro will fall.

Markets also tend to price in what they think the bank will do in the future. So if the ECB signals that it may raise rates at upcoming meetings, EUR will likely go up.

Economic Data Releases

EUR investors also keep a close eye on the latest data releases from the Eurozone. Typically, reports from the Euro area have the biggest impact the single currency, although some releases from Germany – Europe’s largest economy – can also cause movement.

Data releases help markets gauge the health of the Eurozone economy, and often the likelihood of a rate hike or cut from the ECB. The most impactful reports are the PMI surveys, GDP and inflation.

US Dollar (USD)

EUR/USD is the world’s most-traded currency pair. As a result, the Euro has a negative correlation to the US Dollar – when people buy US Dollars, they tend to sell Euros. This means that the Euro often rises when the US Dollar falls, and if the US Dollar strengthens then the Euro tends to weaken.

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