Euro Exchange Rate Reaches Highest Level Since Late 2014

The common European currency keeps on growing driven by the news on the formation of a new German government. The price rally started in 2017. At the same time, experts are getting more and more optimistic about the prospects of the Eurozone and the European Union in general, Deutsche Welle reports.

At this point, the EURUSD exchange rate is well over 1.22. the price rally resumed on January 12^th, right after German media started reporting about some progress achieved during the talks dedicated to the formation if the German government. Back then, the exchange rate stayed around 1.20 but then quickly went all the way up to 1.21 and later broke above 1.22, NordFX reports.

It seems like the governmental crisis is now over and the prospects of creating a new stable government are real. Probably, that’s good news for the entire Eurozone and its common currency since Germany is the biggest and strongest economy in the region, and that’s why the Euro currency is so sensitive about everything that’s going on in the political and economic life of Germany. So, international traders and investors are now more optimistic about the common currency and they seem to have started loading up on the Euro again, which has been fueling the rally over the last few days.

Over the last 12 months, the common European currency has gained a lot – from 1,04 all the way up to 1,22. That’s quite a big move for major currencies like the Euro and the U.S. Dollar.

The most surprising thing about the situation is that the common European currency starts growing when the ECB claims that they are going to keep the interest rate very low (around zero) for quite a long time. The Fed raised the rates 3 time in 2017, which is why the current difference between the ECB and Fed rates is around 1,25-1,5%. Moreover, this spread may well get even wider in the near future since the Federal Reserve is planning 3 more interest rate hikes in 2018, with the first one planed for March 2018.

However, it’s common knowledge that international investors tend to move to the assets with biggest interest rates. That’s why a dollar rally is more likely this year, especially as American stock indexes have been strong and setting new all-time highs.