Euro vs USD
Basics of Currency Pair: EUR/USD (Euro/U.S. Dollar)
The EUR/USD pair has become the most widely-traded pair in the world because it represents a combination of two of the biggest economies in the world. It is affected by factors that influence the value of the euro and/or the U.S. dollar in relation to each other and to other currencies. For this reason, the interest rate differential between the European Central Bank (ECB) and the Federal Reserve (Fed) affects the value of these currencies when compared to each other.
For example, when the Fed intervenes in open market activities to make the U.S. dollar stronger, the value of the EUR/USD cross could decline due to a strengthening of the U.S. dollar compared to the euro. Along the same lines, bad news from the EU economy has an adverse effect on prices for the EUR/USD pair. News of the government debt crisis and immigrant influx in Italy and Greece resulted in a euro selloff, prompting the pair's exchange rate to plunge.
Key Takeaways:
* The EUR/USD pair represents the number of US dollars required to buy a single euro.
* It is affected by government policies and the economics of demand and supply in currency markets for the pair.
