EUR/USD is the exchange rate between the euro and the US dollar — the most-traded currency pair in the world, accounting for around a quarter of all foreign exchange volume. Since Croatia adopted the euro in 2023, EUR/USD directly affects Croatian purchasing power and import costs.
What moves EUR/USD
Interest rate differentials between the ECB and Federal Reserve are the single biggest driver — when the Fed hikes more aggressively than the ECB, the dollar strengthens (EUR/USD falls). Other factors: relative economic growth, energy import dependence (a weaker euro is partly a "Europe pays for gas in USD" story), risk sentiment (USD is the global safe haven), and political stability.
How to read it
EUR/USD above 1.20 historically reflects euro strength and US dollar weakness — supportive for Eurozone consumers, harder for exporters. Below 1.05 reflects dollar strength — raises imported energy and US-dollar-denominated debt costs for Eurozone countries. Parity (1.00) is a psychological line; it was breached during the 2022 energy shock.
What it means for your finances
For Croatian households: a stronger euro means cheaper holidays in the US, cheaper US-dollar-priced imports (electronics, oil-derived products), and lower fuel cost pass-through. A weaker euro raises those costs. For investors: holding USD assets benefits when the dollar strengthens; euro savers benefit from a stronger euro relative to international holdings.