The euro has experienced a significant upswing, reaching levels not seen since late 2021. This rise is attributed to a weakening dollar, fueled by concerns regarding the Federal Reserve’s independence. The euro’s ascent has been further bolstered by expectations of increased defense spending, particularly within Germany. Simultaneously, the European Central Bank (ECB) implemented a widely anticipated interest rate cut.
- The euro traded around $1.15, its strongest level since November 2021.
- The dollar’s weakness stems from concerns over the Fed’s independence, triggered by statements about possibly dismissing Fed Chair Powell.
- The euro has climbed over 5% against the dollar in April.
- Increased defense spending, especially in Germany, provided additional support.
- The ECB cut its deposit rate by 25bps to 2.25%.
- The ECB removed language referring to its policy stance as “restrictive.”
- The ECB warned that the economic outlook has worsened due to escalating trade tensions.
- Markets are pricing in three more 25bps rate cuts by the end of the year.
The described conditions paint a picture of a strengthening euro supported by multiple factors, including perceived weakness in the dollar and policy shifts from the ECB. These factors suggest a potentially sustained period of euro strength.