Euro Behaviour Essay Example | Topics and Well Written Essays - 2000 words

Euro Behaviour - Essay Example From the report it is clear that  economic performance of a trade block depend more on individual countries performance. In our analysis, we intend to evaluate euro’s performance and as such will rely more on the overall activity within member countries. Euro is not political affiliated and thus depend in multi-nation policies regarding the member countries economic performance. When crisis in economic activity within one trade block occur, the effects easily spill to the global economic and asset market. The European Union, as a trade block, has frequently suffered such.According to the report findings  the links in international financial and asset markets are key determinants of a currency’s exchange rate. Single currency or states supremacy cannot influence the rates that her currencies are accorded. Macroeconomics teaches that multiple factors are put into play in regard to determining a currency’s worth in the international market. Individual states cur rency is rated on a scale that is unanimously accepted within the trading scope against a common denomination; majorly the U.S dollar, yen or the euro. However, the rates are never constant varying on the prevailing economic performances as determined by the World Bank. ‘Purchasing power parity’ (PPP) compares rates of trade and prices within a state. Projections of future interest rates of a currency relative to nominal interests are determined by the interest rate parity. (Cumby and Obstfeld, 1982, 1-2). Therefore, at the macro and micro level performance of an economy, the policies made always have an impact to the valuation of her currency. However, the determination of these indices within an economic block like the EU is not dependent on a single country but rather on sum of the overall economic performance of the economic block. The Euro use has expanded very much within the EU region and is now estimated to be in used throughout