The Euro-dollar exchange rate can be defined as the price at which the world demand for the US dollar is equal the world supply of the euros. The EUR/USD is currently the leading currency pair in the world. Trading this pair can also be referred to as trading the “euro”. Its value is mentioned as one euro for every x US dollars hence the EUR and USD exchange rate.
The EUR/USD currency pair is affected by factors that impact the US dollar or the value of the Euro in relation to other currencies as well as each other. Trading this currency pair can generally entail taking a look at various economic releases and also other news affecting the rate. The main economic releases have a huge influence on the direction the exchange rate will take and traders continuously monitor so as to get clear indications on the direction. Some of the main common factors that affect the EUR/USD exchange rate include;
- Interest rates- This is the most vital economic indicator that affects the EUR/USD exchange rate. The most important and necessary element in the valuation of EUR/USD is made up the European benchmark minimum bid rate which is determined and set by the European Central Bank and the benchmark Fed funds rate set by the Federal Reserve of the United States. The US Federal Reserve releases the Fed funds rate 8 times annually while the ECB release their interest rates every month.
- Employment numbers- Employment numbers are of great importance to the analysis of EUR/USD. On every first Friday of a new month, the Bureau of labor statistics in the US releases monthly release of Non-farm employment change thus making up one of the most vital releases in the forex market. Initial jobless claims that are released every Thursday are also important US employment numbers. In Europe, vital employment numbers entail employment numbers in the main powerhouses such as Germany and France as well as other consolidated numbers for the Eurozone.
The latest Brexit is also set to cause uncertainties in investment markets since forex markets mainly focus on the short term. Forex traders who are nervous will probably dump the pound in favor of other more stable currencies and will wait up the point where the new UK will begin to stabilize. Below is an example of a chart showing the latest euro- dollar exchange rate for the month of September