The Analysis Of Factors Affecting Euro Exchange Rate After European Debt Crisis

When the global economy has not recovered from its suffering caused byAmerica sub-prime financial crisis, the European sovereign debt crisis ripped the eurozone economy’s wound again. The European sovereign crisis outbreak in2009continues to this day. Since the beginning of European debt crisis to now, all the eurozone countries have experienced the trauma hit by the European debt crisis in this fiveyears. As the only none sovereign currency, euro has raised concerns on itssustainability. As the second largest international currency in the world, euro affectsthe financial market in euro zone countries for the drastic fluctuations of its exchangerate, and also affects all aspects of the global financial and economic inevitably. It is amust to study on the factors which affect euro exchange rate after the European debtcrisis in order to judge the trend of euro exchange rate.This paper carries on the analysis to the trend of euro exchange rate after theEuropean debt crisis, and explains it by four sections in combining with the process ofthe outbreak and evolution of European debt crisis. The emphasis is to analyze thefundamental factor that affects euro exchange rate from five aspects: the economicgrowth of main members in euro zone, the international payments of euro zone, theinflation of euro zone, the monetary policy of European Central Bank, as well as themajor economic and political events happened during the European debt crisis. Then,it analyzes the factors that affect euro exchange rate in the market behavior after theEuropean debt crisis in three aspects: the short-term change of supply and demand ofeuro against dollar in foreign exchange market, the international price movements ofgold and the price change of international crude oil. The research shows that theeconomic growth of euro zone and the index of dollar affect the euro exchange ratemost. It works out that there is a positive correlation between the economic growth of euro zone and euro exchange rate and a negative correlation between the index ofdollar and euro exchange rate.Furthermore, this study prospects the long-term trend of euro exchange rate byfactor analysis. In the long run, although it has a downtrend of euro exchange rate, itwill tend to stable in overall and have little possibility to fluctuate heavily by reasonof the small downward trend proved by fundamental analysis. In the short term, theeuro exchange rate will continue to decline under the pressure of dollar index, butcannot drop to a large degree.In conclusion, the euro exchange rate will remain stable in a long term.It has anon-oblivious downward trend and wound not have drastic fluctuations. In short term,the euro exchange rate will continue to fall, but not sharply.