Currency Pair: EUR/USD (Euro/U.S. Dollar)
- The abbreviation for the euro and U.S. dollar (EUR/USD) pair or cross for the currencies of the European Union (EU) and the United States (USD). The currency pair tells the reader how many U.S. dollars (the quote currency) are needed to purchase one euro (the base currency).
Trading the EUR/USD currency pair is also known as trading the "euro".
The value of the EUR/USD pair is quoted as 1 euro per x U.S. dollars. For example, if the pair is trading at 1.50 it means that it takes 1.5 U.S. dollars to buy 1 euro.
The EUR/USD 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) will affect the value of these currencies when compared to each other. When the Fed intervenes in open market activities to make the U.S. dollar stronger, for example, the value of the EUR/USD cross could decline, due to a strengthening of the U.S. dollar compared to the euro.
The EUR/USD tends to have a negative correlation with the USD/CHF and a positive correlation to the GBP/USD currency pairs. This is due to the positive correlation of the euro, the Swiss franc and the British pound.
Investment dictionary. Academic. 2012.
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