The US dollar has been gaining ground against the euro for just over a year. From a 1.2372 close on April 18th last year to the 1.1180 finish on May 23rd the united currency has lost 9.6% versus the greenback.  For roughly half of that period April to November 2018 US interest rates were rising, for the second half they were falling. 

The interest rate on the 2-year Treasury, the government security with the closest tie to currency movements rose from 2.40% on April 18th 2018 to 2.95% on November 8th, from then it fell to 2.18% by May 24th. 


For the first period of rising US rates (4/18/18-11/8/18) the euro lost 8.2%.  In the second period (11/9/18-5/24/19) the euro lost the balance 1.6%, given the percentage difference in the original rate.

If we look at the German 2-year yield for a European comparison it has moved from -0.57% on April 18th last year to -0.61% on November 8th and then to -0.63% on May 24th.  


Comparatively the US range of 55 basis points on the upside and 77 on the downside dwarf the German change of 6 points. Clearly the euro level is not being driven by interest rate differentials.

 In effect the fall in US rates has blunted the dollar advantage but it has not taken over the relationship between the currencies. The macro-economic effects of the European economic slowdown and the potential damage from yet unsettled British departure continue to weigh heavily on the euro despite the shrinking rate advantage for the dollar.



Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Analysis feed

Latest Forex Analysis

Editors’ Picks

Bears ignore Aussie holidays, cheer coronavirus news at fresh multi-week low near 0.6815

AUD/USD drops to 0.6814, with an intra-day low of 0.6811, during the early Monday morning in Asia. The fears of China’s coronavirus outbreak are dominating the market’s risk sentiment off-late.


USD/JPY: Coronavirus bearish gap breaks below 109

USD/JPY has dropped heavily in the open, breaking below the 109 handle to print a fresh low of 108.88 as traders prepare for a risk-off week when considering the implications of the Coronavirus. 


Are you anxious about Coronavirus? Well, so are the markets

There's so much we don't know about Coronavirus, which increases the level of concern from public health officials, you & I as well as the markets and we can expect a risk-off start to the week ahead of a pretty major schedule.

Read more

The Week Ahead and Why the FOMC Meeting may not be the Most Interesting

The week ahead is arguably the most important here at the start of 2020.  The Fed and the BOE meet. The US and the eurozone report initial estimates of Q4 19 GDP.  The eurozone also reports its preliminary estimate of January CPI. 

Read more

GBP ends week on a weak note despite upbeat PMI data

The GBP/USD pair spiked to its highest level since January 7th at 1.3174 on Friday with the initial reaction to the upbeat PMI data from the UK. The pair could remain choppy ahead of BoE’s policy decision. 


Forex Majors