The euro has appreciated over 10% against the US dollar in 2023, driven largely by US protectionist trade policies and increasing confidence in the eurozone economy, which is recovering from a mild recession. With foreign investment shifting towards European assets, the euro's value is bolstered further. The divergence in monetary policy between the US Federal Reserve and the European Central Bank also plays a role in this strength, as lower US interest rates make holding dollars less appealing. However, potential tariffs and geopolitical uncertainties may impact this trend.
Trump is undermining trust in the rationality of US policymaking, the long-term outlook for US growth and the sustainability of its public finances.
Lower US interest rates make holding dollars less profitable, prompting investors to favor the euro instead.
With growth of 0.8% last year and a projected 1.3% expansion in 2025, the eurozone is rebounding from a mild recession.
Major currency swings of 10% in mere months are relatively rare and the euro is increasingly being seen as a counterweight to the dollar.
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