Exchange rate movements can arise from different shocks, and their broader economic effects vary with the nature of these shocks. From its trough in February 2025 to December 2025, the euro nominal effective exchange rate (NEER) appreciated by 7.3%. This appreciation, which was largely due to a strengthening against the dollar and the Chinese renminbi, can be interpreted within a structural macroeconomic model. According to the model estimation, movements in the euro NEER have arisen predominantly from changes in risk premia affecting the uncovered interest parity condition (UIP) and an increase in non-energy foreign goods prices. Simulations suggest that the macroeconomic impact of these shocks, particularly the UIP risk premium shock, on output and inflation in the euro area was quantitatively modest relative to other disturbances.
COUTINHO Leonor;
CROITOROV Olga;
PATARACCHIA Beatrice;
RATTO Marco;
REZESSY Andras;
TERESINSKI Jan;
2026-09-07
European Commission
JRC146549
2443-8014 (online),
https://economy-finance.ec.europa.eu/document/download/1409aa9a-f885-43ca-a33c-209987884a35_en?filename=ip333_en.pdf#page=7,
https://publications.jrc.ec.europa.eu/repository/handle/JRC146549,
10.2765/0008299 (online),
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