The euro’s effective exchange rate (EER) is an index of its external value against a selected basket of partner-country currencies. Exchange-rate movements are weighted according to each partner’s importance in euro-area trade in manufactured products and services, rather than treating all currencies equally. The calculation also reflects competition from suppliers in other countries in shared export markets. Separate indices are compiled for different partner groups; EER-17 and EER-40 are examples. Movements in an EER index show how the euro’s trade-weighted value has changed relative to the currencies in the relevant basket.
Source: European Central Bank (ECB) (source). This glossary entry is an independently worded adaptation of the cited information.