EUR/USD

The EUR/USD currency pair refers to the exchange rate between euros and US dollars, that is, how many US dollars can be exchanged for one euro. It is one of the most important and active currency pairs globally as it involves the two largest economies and trading partners. The code for the EUR/USD currency pair is EUR/USD, sometimes referred to simply as EUR/USD or EU.

Factors Affecting EUR/USD

Economic Growth

The economic growth rates of the Eurozone and the United States will affect the currency demand and supply in the two places, and in turn affect the exchange rate. Generally speaking, the faster the economy grows, the more pressure there will be on the currency to appreciate, and vice versa. For example, if the Eurozone's economic growth exceeds that of the United States, the euro will appreciate relative to the dollar, and vice versa. 

Interest Rate Differential

The interest rate policies of the European Central Bank and the Federal Reserve will affect the flow of funds and investment returns between the two places, thereby affecting the exchange rate. Generally speaking, the higher the interest rate, the greater the appreciation pressure on the currency, and vice versa. For example, if the European Central Bank's interest rates are higher than those of the Federal Reserve, the euro will appreciate relative to the dollar, and vice versa.

Fiscal Policy

Fiscal policies in the euro area and the United States will affect government spending and debt levels in both places, and in turn affect exchange rates. Generally speaking, the looser the fiscal policy, the greater the depreciation pressure on the currency, and vice versa. For example, if the euro area's fiscal deficit and debt ratio are higher than those of the United States, the euro will depreciate relative to the dollar, and vice versa. 

Balance of Trade

The trade balance between the Eurozone and the United States will affect the foreign exchange balance and international balance of payments between the two places, thereby affecting the exchange rate. Generally speaking, the larger the trade balance, the greater the appreciation pressure on the currency, and vice versa. For example, if the Eurozone's trade surplus is higher than that of the United States, the euro will appreciate relative to the dollar, and vice versa. 

Market Sentiment

The EUR/USD currency pair is also affected by market sentiment, such as risk appetite, expectations, speculation and other factors. Generally speaking, the more positive the market sentiment, the more favored risk assets are and the euro will appreciate relative to the dollar, and vice versa. For example, in times of global economic recovery or geopolitical tensions, investors may favor the euro over the U.S. dollar.

How to Invest in EUR/USD?

Foreign Currency Fixed Deposit

This is a low-risk way of investing, usually to earn bank fixed deposit interest. You need to open a foreign currency account at the bank first, then exchange NT dollars for euros or US dollars, and deposit a fixed deposit for a certain period. Your earnings depend on fixed deposit interest rates and exchange rate movements.

Foreign Currency Fund

This is an investment method with higher returns than fixed deposits. You can use NT dollars to buy funds denominated in euros or US dollars and hand over your assets to professionals for management. Your earnings depend on the performance of the fund and changes in exchange rates.

Foreign Exchange Margin Trading

This is a high-risk, high-yield investment method. You can buy and sell the EUR/USD currency pair through an online platform, using leverage to enlarge your transaction size. You only need to invest a small margin to establish a foreign exchange transaction of much greater value. Your earnings depend on exchange rate movements and leverage.