What is the EUR/USD exchange rate?

The EUR/USD exchange rate represents the price of one euro expressed in US dollars. If EUR/USD is 1.10, one euro buys $1.10. It is the most heavily traded currency pair in the world, accounting for roughly 24% of all foreign exchange turnover, which averages over $7 trillion daily. The pair's movements affect international trade, corporate earnings, portfolio returns, and central bank policy decisions across two of the world's largest economic blocs.

Interest rate differentials between the Federal Reserve and the European Central Bank (ECB) are the primary driver of EUR/USD over medium-term horizons. When the Fed raises rates faster or higher than the ECB, the dollar strengthens (EUR/USD falls) as capital flows toward the higher-yielding US assets. The 2022 hiking cycle, where the Fed was more aggressive than the ECB, drove EUR/USD briefly below parity (1.00) for the first time in 20 years. Conversely, expectations that the Fed will cut rates before the ECB tend to weaken the dollar and push EUR/USD higher.

Beyond interest rates, the exchange rate reflects relative economic performance, trade balances, and risk sentiment. The eurozone runs a significant trade surplus with much of the world, creating structural demand for euros. However, the US economy has consistently grown faster than the eurozone in recent decades, supporting dollar strength. During global risk-off events, the dollar typically strengthens as a safe haven, pushing EUR/USD lower. During risk-on episodes, the euro benefits from its status as a higher-beta developed market currency.

For businesses with transatlantic operations, EUR/USD movements directly affect revenues and costs. A European company selling products in the US benefits from euro weakness (each dollar of revenue converts to more euros), while a US company with European operations faces the opposite. Many multinationals hedge their EUR/USD exposure using forwards and options. For investors, EUR/USD is a major factor in international portfolio returns: a US investor holding European stocks gains when the euro strengthens and loses when it weakens, adding a currency dimension to the equity return.