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Published on Monday, March 24, 2025

Europe | Turn of the tide for the euro

Summary

In the final quarter of 2024, Donald Trump’s return to power in the United States had a negative impact on the euro. Aggressive protectionist policies and increased fiscal stimulus in the country were expected to push the dollar higher.

Key points

  • Key points:
  • In recent weeks, the euro has rallied strongly from levels below 1.05 to around 1.09 (not seen since October), representing a 5% appreciation in a fairly short period of time.
  • A key factor supporting the euro’s recovery has been the European Commission’s recent announcement of an €800 billion package for European rearmament, coupled with a €500 billion fiscal stimulus plan in Germany, which has helped to build a stronger perception of cohesion and unity across the region.
  • Another key factor in the euro’s appreciation has been the general weakness of the dollar. The Trump administration’s protectionist policies, such as the decision to impose across-the-board tariffs, have elicited trade reprisals from other countries, thus affecting investor confidence and increasing economic uncertainty. As a result, the markets are now expecting to see looser monetary policy from the Federal Reserve.
  • In the coming months, the EUR/USD pairing will remain volatile. However, in the mid run, there are sound reasons to expect a gradual appreciation of the euro to take hold.

Geographies

Documents and files

Press article (PDF)

Turn of the tide for the euro

Spanish - March 24, 2025

Authors

MM
María Martínez BBVA Research - Principal Economist
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