The Euro has strengthened significantly against the US dollar since the beginning of 2025. Political instability in the United States has led to an outflow of investors from the dollar to the euro.
Political Decisions and Their Impact on Currency Markets
Since the beginning of 2025, the Euro has risen over 14% against the US dollar. Central bankers have noted that economic decisions made by the Trump administration contribute to this movement, especially with new tax-and-spend measures and rising tensions with the Federal Reserve.
Reasons for Euro's Rise
Yannis Stournaras, the governor of Greece’s central bank, pointed to three main factors contributing to the dollar's decline: Trump's new tariffs, his criticism of the Fed, and the long-term consequences of his tax reform. He also noted that investors are turning to the Euro as a safer asset amid worsening circumstances in the US.
Euro's Prospects in International Reserves
Despite current challenges, the Euro has the potential to increase its share in international reserves. Paschal Donohoe, president of the Eurogroup, indicated a growth in Euro borrowings, which could strengthen its position. Analysts suggest that with stable economic foundations and improved financial ties among European countries, the Euro could take on a more significant role in the global market.
Given the current economic and political conditions, the Euro is expected to continue its strengthening against the dollar, potentially leading to significant changes in the currency market in the future.
