On a material day, the relationship the American Dollar and the Euro fluctuates. Such fluctuations depend on a variety of reasons which are also different from one country to another, or city to city. Economic releases from governments, financial institutions, insurance and pension fund influence the exchange rates between different currencies. Interest rates are the major economic factor that influences Euro/Dollar. The interest rate for the American dollar are very sensitive to the global economy and is keenly monitored by the government and central banks across the world. As the only legally accepted currency for global transactions, any impact on its interest rates would significantly affect economies. The American dollar is also the benchmark currency for international loans. This means that World Bank and the IMF loans are denominated in the USD. The United States Federal Reserve is the only institution that can vary this interest rate.
The European Union comprising of Eurozone countries is the largest and the most structured trading block with their own accepted currency and bank; the Euro and the European Central bank. Being a substantial trading partner with the United States, the relation between the Euro and the dollar is of great interest to traders, government, and other central banks.
In financial balance, central bank base rates can be said to be hawkish or dovish depending on the prediction of their performance. Hawkish interest rates are when there is a foreseen tightening of interest rates making credit facilities hard and expensive. Interest rates are dovish when they are predicted to loosen and allow for easier and cheap credit facilities.
Today, the euro opened at 1.11 in relation to the dollar. It is expected that the day’s range would average between 1.109-1.117. At around 0349hrs, euro/USD rose to a high of 1.1119 signaling a deterioration of the Euro or better prospects to the dollar. Despite the tumultuous exit of Britain from the Euro, there have not been drastic drops in the performance as foreseen by pundits. A 52-week range was predicted at 1.05-1.117. This remains on course beside the politicking and change of governments in the United Kingdom. At 0816hrs today, July 14th, 2016, the relation between the Euro and the dollar was at, 1.109, which was a great improvement. Possibilities are that the change of governance in Britain, Theresa May taking charge, portends a better future. The change of Britain’s foreign affairs ministry could also make things look better.
The highlight of the day was between 1238 & 1318hrs when the Euro/USD relative percentages rose to over 1.115, slightly show of the annual range. An hour and a half ago, the correlation had stabilized at around 1.1110 which could mean that today’s rates would close off in a better position than yesterday.
Today’s volatility of the Euro/Usd relations came from the aftershocks f BREXIT and the reaction of the world. However, with the situation in Greece improving and the consistency of German’s economic performance, the worst days of the Euro could be gone. Similarly, the fading possibility of knock-over effects of BREXIT in other Eurozone member countries could strengthen the Euro against the dollar further that is used by most of the people across the world.