Fundamentals of the EUR

The Euro's Presence Globally

The Euro finds itself in an interesting position globally. Because the Euro is used by many countries across Europe its global economic impact is substantial. Listed in alphabetical order the Euro is the official currency of the following countries: Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain – these countries comprise what is known as the Eurozone. The economic standing of any of the aforementioned countries can potentially impact the stability and price direction of the Euro. That said, traders dealing in Euro must pay close attention to political factors, and the various economic indicators of each country in the Eurozone.

Some of the relevant economic indicators to the Euro are released directly through the European Central Bank (ECB), while others are released from private data analysis firms. Each of the economic indicators listed and described below have the potential to affect the price and stability of the Euro upon their release. There are other indicators that are directly relevant to the Euro, but that have been excluded from the list below.

Some of the below reports are commonly released by most economic powers around the globe, others are specific only to countries within the Eurozone. The reports are listed in alphabetical order, for more on the report and its strength ranking take a look at each individual indicator description below. For the date and time of the next release for each report please browse our current economic calendar.

French GDP

Gross Domestic Product is considered by most the broadest, most comprehensive barometer of a country's overall economic condition. It measures the sum of all market values on final goods and services produced in a country (domestically) during a specific period of time. A rising trend seen in a country's GDP of course indicates that the economy of said country is improving; as a result foreign investors are more inclined to seek investment opportunities within that nation's bond and stock markets. It is not uncommon to see interest rate hikes as a follow-up to a rising GDP, as central banks will have an increased confidence in their own growing economies. The combination of a rising GDP and potentially higher interest rates can lead to an increase in demand for that nation's currency on a global scale.

French Nonfarm Employment

Nonfarm Employment Change is a measurement of the number of new jobs created in the previous quarter (of course excluding farming related employment). The number of new jobs seen in a given economy is of course largely influential in regards to the strength of that nation's currency; as the number of new jobs directly impacts consumer spending. Consumer spending accounts for nearly half of Gross Domestic Product. GDP is of course one of the most important economic indicators in terms of driving economic progression and the increase of a nation's currency.

German CPI

CPI stands for Consumer Price Index, a fundamental indicator that establishes the rate of price inflation or price increase as seen by consumers when purchasing goods and services. The Consumer Price Index is touted as a timely and detailed inflation indicator. Typically, it is assumed that a rising trend in CPI will positively impact a nation's currency. Central banks are most concerned with price stability. If inflation rates are continually rising interest rates will likely be increased in an effort to bring prices back down. Globally, increased interest rates are said to entice foreign investment flows, which would of course, in turn, increase the demand and the standing of a nation's currency on a global scale. CPI is a well respected fundamental indicator and is ranked highly in terms of its potential impact in the market.

German GDP

Gross Domestic Product is considered by most the broadest, most comprehensive barometer of a country's overall economic condition. It measures the sum of all market values on final goods and services produced in a country (domestically) during a specific period of time. A rising trend seen in a country's GDP of course indicates that the economy of said country is improving; as a result foreign investors are more inclined to seek investment opportunities within that nation's bond and stock markets. It is not uncommon to see interest rate hikes as a follow-up to a rising GDP, as central banks will have an increased confidence in their own growing economies. The combination of a rising GDP and potentially higher interest rates can lead to an increase in demand for that nation's currency on a global scale.

German IFo Business Climate Index

The IFo (Information and Forschung) Business Climate Index surveys manufacturing, wholesale, retail and construction firms in an effort to measure economic confidence in the coming months. Over 7,000 firms are said to participate in the survey which has become a very key indication of economic confidence, or the lack thereof, in the German economy.

German Industrial Production

Industrial production is a measurement of the cumulative dollar amount of product produced by factories and other industrial production facilities. Increased levels of production would of course signify a strengthening economy, thus an increased trend seen in this indicator should positively affect the position of a nation's currency. Industrial production is closely tied with personal income, manufacturing employment and average earnings in that its quick reaction to the business cycle often allows for a pre-emptive leading look into these indicators.

German Manufacturing PMI

PMI stands for Purchasing Managers Index. Before the report is published purchasing managers are surveyed on the present situation of economic factors relevant to their position, factors such as new orders, inventories, production, employment, etc. Traders tend to keep an eye on this indicator because it tends to lead (leading indicator) into data that will later be released. This is because purchasing managers have an early view at the performance of their company. The indicator uses a reading of 50 to measure expansion, or the lack thereof. A reading above 50 would indicate economic expansion.

German ZEW Economic Sentiment

ZEW stands for Zentrum fur Europaische Wirtschaftsforschung; for non German speakers, probably an irrelevant fact. At any rate, the ZEW Economic Sentiment takes a look at investor sentiment on the institutional level. Participants in the gathering of data state whether they feel optimistic or pessimistic concerning the state of their investments and the health of the economy in the coming six months. The indicator compares the percent of investors who feel positive about the pending economy to those who feel negative and then factors the number of those who expect no change. If 40% of investors feel optimistic concerning the pending economy and 30% expect a falling economy, leaving a remaining 30% that expect no change the reading would measure +10. Investor sentiment, particularly investors on an institutional level, can largely impact overall economic sentiment, thus a positive trend seen in this indicator should positively impact the economy.

Industrial New Orders

Industrial New Orders is a simple measurement of the number of new purchase orders as seen by domestic manufacturers for either durable or non-durable goods in a given period of time.

Interest Rate Statement

The Governing Council of the European Central Bank (ECB) publishes an Interest Rate Statement every month. Perhaps at the core of all economic indicators are those that relate to interest rate decisions. In fact, most would argue that other economic indicators are used by the average trader as nothing more than a means to anticipate pending interest rate changes. The bulk of the statement includes an explanation of the various economic factors that influenced the change in rates (or lack thereof) for the nation's short term interest rate, also referred to as the "cash rate". The report will also include insight as to what the next interest rate decision might be. Short term interest rates are of monumental importance to traders in any of the major financial markets. This is due to the fact that high interest rates attract foreign investors who are seeking the highest possible return in exchange for the lowest possible risk. Central banks are most concerned with price stability. If inflation rates are continually rising interest rates will likely be increased in an effort to bring prices back down. Globally, increased interest rates are said to entice foreign investment flows, which would of course, in turn, increase the demand and the standing of a nation's currency on a global scale. Seasoned economists understand the relationship between inflation and interest rates, namely that inflation tends to precede higher interest rates, which ultimately increases the global demand for a nation's currency.