Currencies // Developed Markets
The EUR/USD currency pair represents the number of US dollars that can be bought with one euro.
|Max. order size||20,000,000|
The US dollar/euro currency pair is the most widely traded currency transaction in the world. Volumes traded globally in this currency pair are huge and reflect the pairâ€™s position as two of the most used currencies in the world. The dollar is the worldâ€™s foremost reserve currency. Many other currencies are pegged to it and move in tandem with it. The euro is probably second after the dollar as a potential reserve currency, but it trails some way behind. The euro (EUR) is the official currency of 16 of the 27 member states of the European Union or EU. It is the second largest reserve currency and the second most traded currency in the world after the US dollar. It is the youngest reserve currency, coming into existence in 1999 at a rate of 1:1 against the old ECU (European currency unit). The majority of US dollar-dominated notes are held outside the United States. The level of demand for dollars overseas has allowed the US to maintain constant trade deficits since the early 1990â€™s without any discernible currency depreciation. The US dollar is also used as the standard unit of currency in international markets for commodities such as gold, petroleum and agricultural products reflecting its position as the worldâ€™s leading consumer economy and as such is the heartbeat of the global economy. The US is the largest economy in the world, rich in mineral resources and agricultural land and is a significant player in international trade as well as the worldâ€™s largest importer of goods and services. It now imports much more than it exports. As for the euro, the 16 countries that have adopted it so far: Germany, France, Italy, Spain, Netherlands, Belgium, Austria, Finland, Portugal, Ireland Luxembourg, Greece, Slovenia, Cyprus, Malta and Slovakia. It is also used outside the EU, for example in Montenegro and Kosovo.
Factors affecting the euro exchange rate are economic data. The most important economic data is from Germany, the largest euro zone economy. Also crucial are the budget deficits of the member countries which must be kept under 3% of GDP. Other important factors affecting the euro exchange rate are the difference in the 10 year government bond yields between Europe and the US and the difference between three month futures contracts (Euribor) and the three month cash eurodollar futures. The euro can also suffer from fears about political instability in Russia due to that countryâ€™s close proximity to the euro zone. Factors affecting the US dollar are GDP growth, inflation, interest rates, unemployment and current account deficit.