Cape Verdean Escudo (CVE) to euro (EUR)

The CVE/EUR currency pair represents the exchange rate between the Cape Verdean escudo (CVE), the official currency of Cabo Verde, and the euro (EUR), the official currency of the eurozone. This directed pair indicates how many euros are required to purchase one Cape Verdean escudo. An appreciation of the escudo means that fewer euros are needed to buy one CVE, making Cabo Verdean goods and services more expensive for eurozone importers and travelers. Conversely, a depreciation of the escudo makes Cabo Verde more affordable for eurozone tourists and investors. The pair is primarily used by businesses engaged in trade between Cabo Verde and the eurozone, as well as by tourists and remittance senders.

The structural drivers of CVE/EUR are heavily influenced by the monetary policies of the Bank of Cabo Verde and the European Central Bank. The escudo is pegged to the euro via a crawling peg system, with a central rate of 110.265 CVE per EUR, and a fluctuation band of ±1%. This peg means that the Bank of Cabo Verde must maintain sufficient foreign reserves and align its interest rate policy with the ECB to defend the peg. Key factors affecting the pair include interest rate differentials, inflation differentials, economic growth in both regions, tourism flows (a major component of Cabo Verde's economy), foreign direct investment, remittances, and global risk sentiment. Commodity prices, particularly for fuel and food imports, also impact Cabo Verde's trade balance and thus the stability of the peg.

Over the past several years, the CVE/EUR exchange rate has remained remarkably stable due to the currency peg. Since the peg was established in 1998, the rate has fluctuated only within the narrow band around the central parity. The most notable event was the 2018 revision of the peg from a basket of currencies to a sole peg to the euro, which reinforced stability. During the COVID-19 pandemic, the peg held firm despite economic shocks, supported by international financial assistance. In the post-pandemic period, the peg has continued to provide predictability for trade and investment, with the Bank of Cabo Verde adjusting interest rates in line with ECB moves to maintain the anchor. No significant deviations from the peg have occurred, and the outlook remains one of continued stability as long as the monetary authorities maintain their commitment.