1. euro zone: euro zone
It consists of 12 countries, including Germany, France, Italy, Spain, the Netherlands, Belgium, Austria, Finland, Portugal, Ireland, Luxembourg and Greece, all of which use the euro as their currency.
2. European Central Bank: European Central Bank.
Control the monetary policy in the euro zone. The decision-making body is the Central Bank Committee, which consists of the Executive Committee and the central bank governors of 12 member countries. The Executive Committee includes the President, Deputy President and four members of the European Central Bank.
3. Policy goal of the European Central Bank: The primary goal is to stabilize prices.
Its monetary policy has two main foundations, one is the prospect of price trend and price stability risk. Price stability is mainly measured by the adjusted consumer price index (HICP), so its annual growth rate is less than 2%. HICP is particularly important, which consists of a series of indicators and expectations, and is an important indicator to measure inflation. The second is to control the monetary growth of money supply (M3). The European Central Bank has set the reference value of M3 annual growth rate as 4.5%. The European Central Bank holds a committee every two weeks on Thursday to set new interest rate targets. After the first meeting of each month, the European Central Bank will issue a briefing to announce the prospects of monetary policy and the overall economic situation.
4. Interest rate: general interest rate
It is the main short-term exchange rate used by the central bank to regulate the liquidity of the money market. The spread between this interest rate and the US federal funds rate is one of the factors that determine the exchange rate of Euro/USD.
5.3-month euro deposit (Euribor): 3-month euro deposit.
Refers to the euro deposits of banks outside the euro zone. Similarly, the spread between this interest rate and other countries' interest rates in the same period is also used to evaluate the exchange rate level. For example, when the interest rate of three-month Eurodeposit is higher than that of three-month Eurodeposit in the same period, the exchange rate of Euro/USD will be improved.
6. 10-year treasury bonds: 10-year treasury bonds.
The spread between it and the US 10-year treasury bonds is another important factor affecting the euro/dollar. German 10-year government bonds are usually used as benchmarks. If its interest rate is lower than that of US Treasury bonds in the same period, then if the spread narrows (that is, the yield of German government bonds rises or the yield of US government bonds falls), it will theoretically push up the exchange rate of Euro/US dollar. So the price difference between them is generally more meaningful than their absolute value.
7. Economic data: Economic data
The most important economic data comes from Germany, the largest economy in the euro zone. The main data include: GDP, inflation data (CPI or HCPI), industrial production and unemployment rate. If you only look at Germany, it also includes the IFO survey (a widely used business confidence survey index). There is also the fiscal deficit of member States. According to the Stability and Growth Pact of the euro zone, each country's fiscal deficit must be controlled below 3% of GDP, and each country should have the goal of further reducing the deficit. Cross exchange rate effect: cross exchange rate effect. Like the dollar exchange rate, the cross will also affect the euro exchange rate.
8.3-month euro futures contract (Euribor): 3-month euro futures contract.
This contract value shows the market's expectation of the 3-month euro deposit interest rate (related to the contract expiration date). For example, the price difference between the three-month Euroeuro futures contract and the three-month Eurodollar futures contract is the basic change that determines the future trend of the euro/dollar.
9. Political factors
Compared with other exchange rates, Euro/USD is most susceptible to political factors, such as domestic factors in France, Germany or Italy. Political and financial instability in the former Soviet Union countries will also affect the euro, because a considerable number of German investors have invested in Russia.