Market conditions are currently seeing the euro strengthening against the dollar, reaching levels not seen since October 2024. This upward movement is attributed to escalating global trade tensions, particularly between the U.S. and China, and emerging political stability within Europe. Investors are shifting away from the U.S. dollar and other traditional safe-haven assets.
- The euro climbed back to $1.1, approaching its strongest level since October 2024.
- Escalating trade tensions between the U.S. and China are buoying the euro.
- China announced it would raise tariffs on all U.S. goods to 84%.
- The European Commission announced retaliatory tariffs on nearly €21 billion of U.S. products.
- Germany’s CDU/CSU and SPD reached a coalition agreement.
- Friedrich Merz is expected to become Chancellor next month.
- The European Central Bank is widely expected to deliver a 25 basis point rate cut this month.
The euro is benefiting from a confluence of factors. Geopolitical uncertainty, specifically the trade war, is weakening the dollar and pushing investors towards the euro. The perception of increased political stability in Europe, stemming from the German coalition agreement, is also boosting confidence in the currency. While a potential interest rate cut by the ECB could typically weaken a currency, in this case, it seems to be overshadowed by the other, more significant factors at play, allowing the euro to strengthen.