Euro in Dollar
The euro slipped below $1.04 as investors anticipated a widening interest rate differential between the US and Europe. Strong US jobs data reinforced the Federal Reserve’s decision to maintain its current interest rate, thereby strengthening the dollar. Conversely, the European Central Bank (ECB) recently implemented rate cuts and hinted at further potential easing in March.
Concerns about US tariffs potentially triggering deflationary pressures have led to expectations of more significant ECB rate cuts. Market forecasts now predict the deposit rate to fall to 1.87% by December. Further anxieties surrounding President Trump’s trade policies, including the possibility of new tariffs on the EU, are dampening market sentiment towards the euro.
The EUR/USD exchange rate decreased by 0.30% to 1.0297 on Sunday, February 9th, down from 1.0328 in the previous trading session. The historical high for the Euro to US Dollar exchange rate (EUR/USD) was 1.87 in July 1973. Although the euro was officially introduced on January 1st, 1999, synthetic historical prices dating back further can be calculated using a weighted average of the preceding European currencies.
Trading Economics’ global macro models and analyst predictions anticipate the EUR/USD to trade at 1.03 by the end of this quarter. Furthermore, their 12-month forecast estimates the exchange rate to be around 1.01.
The spot exchange rate for EUR/USD indicates the current value of one euro in US dollars for immediate exchange. In contrast, the EUR/USD forward rate is agreed upon today but for delivery and payment at a specified future date. From 1957 to 2025, the EUR/USD exchange rate has fluctuated between a high of 1.87 and a low of 0.64.
Several economic factors influence the euro to dollar exchange rate. Recent data reveals a decline in Eurozone retail sales, exceeding expectations. Additionally, the Euro Area experienced a softening downturn in construction activity in January. While the euro saw a recent rise, analysts predict a potential downturn in the near future. Eurozone producer prices have increased for the third consecutive month, and services output saw a slight rise in January. Private sector activity in the Eurozone confirms a rebound, and the inflation rate rose in January. The manufacturing contraction in the Eurozone has eased in January, and consumer inflation expectations continue to edge upwards.
The divergence in monetary policy between the Federal Reserve and the European Central Bank plays a crucial role in the euro to dollar exchange rate fluctuations. The US Federal Funds interest rate remains at 4.50%, while the Euro Area interest rate stands at 2.90% following a recent cut from 3.15%. This difference in interest rates contributes to the dollar’s strength against the euro. Other influencing factors include inflation rates, with the US at 2.90% and the Euro Area at 2.50%, and employment data, with the US non-farm payrolls showing an increase of 143,000 jobs in January.