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Effective exchange rates

Nominal EER

The ECB publishes the nominal effective exchange rate (EER) of the euro based on weighted geometric averages of bilateral euro exchange rates against the currencies of a selection of trading partners. This rate indicates whether it is getting more or less expensive on average to exchange foreign currency for euro.

Real EER

The real EER provides a measure of the euro area’s international price and cost competitiveness. The ECB calculates EERs based on the following deflators, which measure developments in prices and costs in the euro area and in its main trading partners: consumer price indices, producer price indices, GDP deflators, and unit labour cost indices – the latter reflecting either the total economy or only the manufacturing sector.

Selected features

Nominal and real EER indices are currently computed against

  • a narrow group of 12 partner countries (EER-12), including Australia, Canada, Denmark, Hong Kong, Japan, Korea, Norway, Singapore, Sweden, Switzerland, the United Kingdom and the United States
  • a group of 19 partner countries (EER-19), comprising the EER-12 plus Bulgaria, China, Croatia, Czech Republic, Hungary, Poland and Romania
  • a broad group of 42 partner countries (EER-42), encompassing the EER-19 plus Algeria, Argentina, Brazil, Chile, Colombia, Iceland, India, Indonesia, Israel, Malaysia, Mexico, Morocco, New Zealand, Peru, the Philippines, Russia, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey, Ukraine and the United Arab Emirates.

The EERs are constructed using moving trade weights, computed on the basis of shares in euro area external trade in manufactured goods and services. However, manufacturing-focused real effective exchange rates deflated by producer prices (PPI) or unit labour cost in the manufacturing sector (ULCM) use weights solely based on trade in manufactured goods. The weights incorporate information on both exports and imports. Import weights are the simple shares of each partner country in total imports. Exports are double-weighted in order to account for “third-market effects”, i.e. to capture the competition faced in foreign markets from both domestic producers and exporters from third countries. The final overall weights of each partner country are obtained as the weighted average of the export and import weights.