Euro currency characteristics
The main features of Euro banknotes can be briefly summarized as follows:
Currency name: Euro (EURO)
Issuing agency: European Central Bank (EUROPEAN CENTRAL BANK)
Currency symbol: EUR
Currency carry: 1 Euro = 100 Euro cents (CENTS)
Banknote denominations: 5, 10, 20, 50, 100, 200, 500 euros. There are eight denominations of 1, 2, 5, 10, 20, 50 Euro cents, and 1 Euro and 2 Euro.
The participating countries decided on the name Euro when the European Parliament was held in Madrid, Spain, in December 1995. The official abbreviation for the Euro is EUR.
The euro symbol looks a lot like the English letter E with two parallel lines in the middle. The idea of this symbol comes from the fifth letter (ε) of the Greek language. On the one hand, it is respected by the birthplace of European civilization. On the one hand, it is also the first letter of Europe, and the two parallel lines in the middle symbolize the euro's stability.
Factors affecting the euro
Fundamental factors affecting the euro
Composed of 12 countries, Germany, France, Italy, Spain, the Netherlands, Belgium, Austria, Finland, Portugal, Ireland, Luxembourg, and Greece use the euro as their currency.
European Central Bank(ECB)
Control the monetary policy of the Eurozone. The decision-making body is the Central Bank Committee, composed of executive committee members and central bank presidents of 12 member states. The executive committee includes the ECB president, vice president, and four members.
ECB policy goals
The primary goal is to stabilize prices. There are two main foundations for its monetary policy. One is the outlook for price trends and price stability risks. Price stability is mainly measured by the Harmonized Index of Consumer Prices (HICP) after adjustment so that its annual growth rate is less than 2%. HICP is particularly important. It consists of a series of indexes and expected values and is an essential indicator for measuring inflation. The second is the money supply (M3) that controls the growth of money. ECB sets the reference value of M3 annual increase at 4.5%.
The ECB holds a committee every two weeks on Thursdays to formulate new interest rate indicators. After the first meeting of each month, the ECB will publish a briefing report on the overall monetary policy and economic outlook.
Interest Rates: General interest rates. It is the primary short-term exchange rate in "borrowing new debts to repay old debts" used by the central bank to adjust the liquidity of the money market. The spread between this interest rate and the US Federal Funds Rate is one factor that determines the EUR/USD exchange rate.
3-month Euro deposit (Euribor)
3-month European Euro deposits refer to Euro deposits held in banks outside the Eurozone. Similarly, the spread between this interest rate and other countries' interest rates over the same period also assesses the exchange rate level. For example, when the 3-month European Euro deposit interest rate is higher than the 3-month European dollar deposit interest rate during the same period, the EUR/USD exchange rate will be raised.
10-Year Government Bonds
The spread between it and the U.S. 10-year Treasury bill is another crucial factor affecting EUR/USD. Usually, the German 10-year government bond is used as the benchmark. If the interest rate level is lower than that of the US Treasury bills during the same period, then if the interest rate spread narrows (that is, the German bond yield rises or the US Treasury bill gains fall), theoretically, the EUR/USD exchange rate will be pushed up. Therefore, the spread between the two is generally more meaningful than the absolute value of the two.
The most important economic data comes from Germany, the largest economy in the Eurozone. The primary data includes GDP, inflation data (CPI or HCPI), industrial production, and unemployment. It is from Germany alone and consists of the IFO survey (a widely used business confidence survey index). There is also the fiscal deficit of each member country. According to the Stability and Growth Pact of the Eurozone, the budgetary deficit of each country must be controlled below 3% of GDP, and each country must have the goal of further reducing the deficit. Cross Rate Effect: Cross rate effect. Like the exchange rate of the US dollar, cross-trading will also affect the euro's exchange rate.
3-month Euro Futures Contract (Euribor)
This contract value shows the market's expected value of the 3-month European Euro deposit interest rate (related to the contract's expiry date). For example, the interest rate difference between the 3-month European Euro futures contract and the 3-month European dollar futures contract is the fundamental change determining the future trend of EUR/USD.
Compared with other exchange rates, EUR/USD is most susceptible to political factors, such as domestic factors in France, Germany, or Italy. The political and financial instability in the former Soviet Union countries will also affect the euro because many German investors invest in Russia.