What countries are using the euro currency?

The euro is the second largest reserve currency and the second most traded currency in the world.

The euro is the official currency of euro-zone, which consists of 17 of the 27 member states of the European Union. These 17 members which adopted euro are Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain.

The ten countries, which are EU countries but not using the euro as their official currencies, are Bulgaria, the Czech Republic, Denmark, Hungary, Latvia, Lithuania, Poland, Romania, Sweden, and the United Kingdom.

Outside the EU, Monaco, San Marino and Vatican started to use the euro as their currency since 2002. They signed formal agreement with the EU and acquired the right to mint euro coins with their own designs on the national side. Others, like Andorra, Kosovo and Montenegro have adopted the euro unilaterally. Some overseas territories of EU members like Mayotte, Clipperton Island, French Southern and Antarctic Lands, Saint Pierre and Miquelon use the euro while they themselves are not part of the EU. On the other hand, UK Sovereign Base areas (Akrotiri and Dhekelia) are the only areas under EU member of British sovereignty but use the euro.

Euro coins and banknotes

All Euro Coins have a common side (face side) showing Latin alphabet version of euro, the value written by Arabic numerals and a map of EU. The national side (backside) shows with the image specifically chose by the issuing country’s bank. Euro Coins from any member state may be freely used in euro-zone countries.

Euro banknote has common designs on both sides. The front features windows or gateways while the back features bridges. 7 banknotes are issued in €500, €200, €100, €50, €20, €10, €5 whose sizes are different according to Euro Banknotes denomination. The €5 euro banknote is the smallest size and the €500 banknote is the biggest size. Each banknote has its own color which dedicates to an artistic period of European architecture

Important Indicators for the Euro

When it comes to Eurozone economic reports, the only ones that affect the euro are German or Eurozone data. The largest countries in the Eurozone in order of GDP contribution are Germany, France, Italy, and Spain. While French and Italian data are important, they rarely move the currency. So what forex traders should focus on are the broader regional reports and German data. Central bank rate decisions are the most important, but here are some additional economic reports that can have meaningful impact on the currency.

PMIs

Every month, Markit Economics releases the PMI indices for the Manufacturing and Service sectors. For the Eurozone, they provide this data for the four largest economies and a composite index for the region. These numbers are extremely market moving because they provide the most up-to-date information on how each of the economies are performing in the current month and not how the economies CURRENCY PROFILE: EURO (EUR) 220 performed the previous month like many other reports. However, since the reports are for the current period, they are usually subject to revisions so the euro will move on the preliminary and secondary reports. A reading above 50 represents expansion, and a reading below 50 represents contraction. For the Eurozone, the manufacturing PMI index is the most important along with the composite index, which aggregates how the manufacturing and service sector are performing. Since the German data are released shortly before the Eurozone report, they can have a greater impact on the currency

IFO Survey

Germany is by far the largest economy in Europe and is responsible for approximately 20% of total GDP. Any insight into German business conditions is seen as an insight into Europe as a whole. The IFO is a monthly survey conducted by the IFO institute. They survey over 7,000 German businesses, asking for their assessment of the German business climate and their short-term plans. The initial publication of the results consists of the business climate headline figure and its two equally weighted subindices: current business conditions and business expectations. The typical range is from 80 to 120, with a higher number indicating greater business confidence. The report is most valuable, however, when measured against previous data.

Inflation Indicators—HICP

Since the ECB has an inflation mandate, the EU Harmonized Index of Consumer Prices (HICP) published by Eurostat is very important. This harmonized index is designed for international comparison as required by EU law. The index is compiled with information on prices retrieved by each national statistical agency. Individual countries are required to provide Eurostat with the 100 indices used to compute the HICP. The national HICPs are totaled by Eurostat as a weighted average of these subindices, and the weights used are country-specific. The HICP is released at the end of the month following the reference period, which is about 10 days after the publications of the national CPIs from Spain and France, the final EMU-5 countries to release their CPIs. Even if part of the information is already known when the HICP is released, it is an important release because it serves as the reference inflation index for the ECB who aims to keep Eurozone consumer price inflation between 0% and 2%

German Industrial Production

Industrial production data are seasonally adjusted (SA) and include a breakdown into four major subcategories: mining, manufacturing, energy, and construction. The manufacturing aggregate comprises four main product groups: basic and producer CURRENCY PROFILE: EURO (EUR) 221 goods, capital goods, consumer durables, and consumer nondurables. The market tends to pay attention to the annual rate of change and the seasonally adjusted month-on-month figure. Germany’s figure is most important since it is the largest country in the Eurozone; however, the market can also react to the French industrial production report. The initial industrial production release is based on a narrower data sample and hence subject to revision when the full sample has become available. The ministry occasionally provides insight on the expected direction of the revision in the initial data release.

German Unemployment

Labor market numbers are important for every country and in the case of the Eurozone, German unemployment is the most important. Released by the Labor Office, the data contain information on the number of unemployed, as well as the changes on the previous month, on both seasonally (SA) and nonseasonally (NSA) adjusted terms. The NSA unemployment rate is provided, along with data on vacancies, short-shift working arrangements, and the number of employees (temporarily suspended in 1999). Within an hour after the FLO release, the Bundesbank releases the SA unemployment rate. The day ahead of the release, there is often a leak of the official data from a trade-union source. The leak is usually of the NSA level of unemployment in millions. When a precise figure is reported on Reuters, as given by ‘‘sources’’ for the NSA level of unemployment, the leak usually reflects the official figures. Rumors often circulate up to one week before the official release, and they are notoriously imprecise. Regardless, a drop in unemployment along with an improvement in the jobless rate is positive for the currency, whereas a rise in jobless claims or increase in the unemployment rate is negative for the currency.

Preliminary GDP

Preliminary GDP is issued when Eurostat has collected data from a sufficient number of countries to produce an estimate. This usually includes France, Germany, and the Netherlands. However, Italy is not included in the preliminary release and is only added in the final number. The yearly aggregates for EU-15 and EMU-11 are a simple sum of national GDP. For the quarterly accounts, the aggregation is more complex since some countries (Greece, Ireland, and Luxembourg) do not yet produce quarterly national accounts data. Moreover, Portugal produces only partial quarterly accounts with a significant lag. Thus, both the EU-15 and EMU-11 quarterly paths are the result of estimates from quarterly data based on a group of countries accounting for more than 95% of total EU GDP (see the Foreword for a detailed description of the weights of each country in the EU)

M3

M3 is a broad measure of money supply, which includes everything from notes and coins to bank deposits. The ECB closely monitors M3 as they view it as a key measure of inflation. At its session in December 1998, the governing council of the ECB set its first reference value for M3 growth at 4.5%. This value supports inflation below 2%, trend growth of 2% to 2.5%, and a long-term decline in the velocity of money by 0.5% to 1%. The growth rate is monitored on a three-month moving average basis in order to prevent monthly volatility to distort the information given by the aggregate. The ECB’s approach to monetary targeting leaves considerable room for maneuver and interpretation. Because the ECB does not impose bands on M3 growth, as the Bundesbank used to do, there will be no automatic action when M3 growth diverges from the reference value. Moreover, although the ECB considers M3 to be the key indicator, it will also take into account the changes in other monetary aggregates.

Individual Country Budget Deficits

The Stability and Growth Pact states that budget deficits for every country in the monetary union must be kept below 3% of GDP. Failure to meet these targets will be punished. However through the years many Eurozone nations have had deficits in excess of 3% and penalties have not been enforced.