Overview
- The euro climbed above $1.20 for the first time since 2021, its highest in roughly four and a half years and about 15% stronger since President Trump’s investiture.
- Trump said the dollar was doing “very well,” called its decline “great,” and boasted he could move it “like a yo-yo,” reinforcing perceptions he favors a weaker currency to boost U.S. competitiveness.
- Analysts report that the dollar’s safe-haven appeal has faded, with investors diversifying away from U.S. assets due to shifting trade threats, geopolitical saber-rattling, and pressure on the Federal Reserve.
- A stronger euro lifts eurozone purchasing power and supports import-heavy sectors and outbound travel, but it strains exporters such as autos, machinery, and luxury groups like LVMH, with Germany seen as particularly exposed.
- The appreciation could cool imported inflation and increase the chance of further ECB rate cuts, while France’s central bank cautions the euro will not soon displace the dollar and research finds most U.S. tariff costs fall on Americans.