How Does Differentials Affect Euro Currency Over Time
Foreign Exchange Exposure
Factors Affecting Euro Currency over time
There are many key factors which can affect the value of the Euro currency over time. Germany’s economy seems to also be a major player in relation to the Euro currency. One of the factors differentials in inflation, can affect the currency as countries with lower inflation rates would have increases in the value of their currency while countries with higher inflation rates would experience depreciation in their currency. Therefore if there is lower inflation in Germany and the countries that use the Euro then the exports from those countries become more expensive and there would be an increase in the demand for the Euro.
Monetary policy by the central bank which leads to differentials in interest rates is another key factor that can affect the value of the Euro. This can also influence inflation as higher interest rates can offer higher returns for lenders and lower interest rates thus offer lower returns. …show more content…
This is measured by gross domestic product (GPD) which is the measure of the total goods and services the Euro zone produces. Therefore the growth in GDP is a sign that the economy is doing well which is good sign for the currency.
Balance for payments is another key factor which deals with the trade balance and current account. A surplus in the current account means that more capital is flowing into the country than out which is positive for the currency while a deficit in the current account means the opposite and hence is negative for the currency.
Confidence and Sentiment report is yet another factor that can affect the value of the Euro. A major sentiment report is the German ZEW Survey which asks over 300 financial experts about the direction of the economy. If this survey returns above forecasted it would be a positive effect for the Euro currency (Nguyen,
Factors Affecting Euro Currency over time
There are many key factors which can affect the value of the Euro currency over time. Germany’s economy seems to also be a major player in relation to the Euro currency. One of the factors differentials in inflation, can affect the currency as countries with lower inflation rates would have increases in the value of their currency while countries with higher inflation rates would experience depreciation in their currency. Therefore if there is lower inflation in Germany and the countries that use the Euro then the exports from those countries become more expensive and there would be an increase in the demand for the Euro.
Monetary policy by the central bank which leads to differentials in interest rates is another key factor that can affect the value of the Euro. This can also influence inflation as higher interest rates can offer higher returns for lenders and lower interest rates thus offer lower returns. …show more content…
This is measured by gross domestic product (GPD) which is the measure of the total goods and services the Euro zone produces. Therefore the growth in GDP is a sign that the economy is doing well which is good sign for the currency.
Balance for payments is another key factor which deals with the trade balance and current account. A surplus in the current account means that more capital is flowing into the country than out which is positive for the currency while a deficit in the current account means the opposite and hence is negative for the currency.
Confidence and Sentiment report is yet another factor that can affect the value of the Euro. A major sentiment report is the German ZEW Survey which asks over 300 financial experts about the direction of the economy. If this survey returns above forecasted it would be a positive effect for the Euro currency (Nguyen,