Summary:
Is the euro stronger than the dollar in 2025? Discover the latest EUR/USD exchange rates, historical trends, and expert predictions in this full breakdown.
In 2025, the euro has strengthened significantly against the U.S. dollar—up roughly 12% since the start of the year—reshaping global trade dynamics, investment flows, and even corporate earnings.
This article examines whether the euro is genuinely stronger than the dollar now, what factors are influencing this shift, and the potential duration of this trend.
As of mid-July, the EUR/USD exchange rate hovers near 1.1611, modestly lower after a recent peak and a slight dollar rebound. So far this year, the euro has increased approximately 12% in value compared to the dollar—a significant shift in the currency environment.
As of July 16, 2025, the EUR/USD exchange rate is 1.1615, in line with ECB reference data. Technical analysts observed that EUR/USD climbed from early lows near 1.0257 to strong mid-year highs above 1.18, with key resistance around 1.12–1.13 earlier in the year. While bearish setups surfaced in some cycles, the overall bias remains upward into mid-July.
Additionally, the dollar's share in global reserves has dropped to 57.7%, while the euro's share has climbed to 20.1%—its highest since late 2022, according to the IMF.
1. Diverging Central Bank Policies
The European Central Bank (ECB) paused its easing cycle in June and even hinted at halting rate cuts due to the euro's rapid appreciation. By contrast, markets have priced in fewer U.S. rate cuts later this year, leaving the dollar on the defensive.
2. Global Shift from Dollars
Bank of America identifies the highest euro overweight stance among investors since 2005, coinciding with a 10% decline in the U.S. dollar index thus far in 2025.
Deutsche Bank and Goldman Sachs caution that the dollar's "exorbitant privilege" is diminishing due to fiscal changes and trade tensions.
3. European Resilience and Investment
Despite soft growth and trade pressures, eurozone macro data and political reforms have improved sentiment. Germany's €500 billion investment initiative pushed the euro above several-year highs.
4. U.S. Trade Headwinds
Trump-era tariff threats have weighed on the dollar, while Paris-style investor tilt into Europe drives capital flows into the eurozone.
The euro and the U.S. dollar have a long, dynamic history of competition in global currency markets. Over the past two decades, the EUR/USD exchange rate has swung from parity (1.00) to peaks above 1.60, reflecting shifts in monetary policy, economic growth, and geopolitical stability.
1. Early History and Structural Parity
When the euro was launched in 1999, it initially weakened against the dollar, dropping below 0.90 in its early years due to scepticism around the EU's economic integration.
But by 2002–2003, confidence in the eurozone improved, and the euro began to rise steadily, eventually surpassing the dollar by 2004.
2. Peaks and Pullbacks (2007–2014)
The euro reached a high of 1.60 USD in mid-2008, just before the global financial crisis. It was driven by:
The housing collapse burdened a weaker U.S. economy
Higher eurozone interest rates from the ECB.
A strong belief in the euro as a credible reserve currency
However, following the 2008 crash and subsequent eurozone sovereign debt crisis, the euro began to lose ground again.
From 2010 to 2015, Greek defaults, political unrest, and the ECB's sluggish policy actions led to the euro's decline, reaching a low of 1.05 by early 2015.
3. The Dollar Reasserts Dominance (2015–2022)
During this period, the dollar dominated global FX markets due to:
The Fed's aggressive monetary tightening from 2016 to 2019.
Europe's slow economic recovery and negative interest rates.
Political fragmentation in the EU and Brexit uncertainties.
By 2022, the euro briefly dipped below parity (0.96 USD)—a symbolic low not seen since 2002—driven by Russia's invasion of Ukraine, an energy crisis in Europe, and rapidly rising U.S. interest rates.
4. Euro's Resurgence and Dollar's Retreat (2023–2025)
The turning point came post-2023:
U.S. fiscal imbalance and ballooning debt spooked foreign investors.
Global de-dollarisation began to accelerate as BRICS and oil exporters diversified reserves.
European economic resilience, led by green investment, AI infrastructure, and German reindustrialisation, helped boost confidence in the euro.
The ECB began slowing its monetary easing in 2024, while the Fed signalled prolonged cuts in 2025.
By mid-2025, the euro had robustly surpassed the dollar, climbing over 1.16 USD, indicating a complete turnaround from the lows of 2022. Global investors also raised their euro holdings, and central banks adjusted their reserves in favour of euros, further strengthening the trend.
Benefits
Increases the purchasing power of eurozone consumers through lowered import expenses.
Broadens global influence and strengthens capital inflows into euro-denominated assets.
Drawbacks
Weakens eurozone export competitiveness; large exporters have already revised forecasts lower.
Risks of eurozone inflation falling too quickly below the ECB's 2% target.
Major institutions vary widely in their future forecasts:
UBS expects EUR/USD to reach ~1.10 by year-end.
Wells Fargo projects a drop to 0.98, citing U.S. economic resilience.
Commerzbank forecasts a rise to 1.12 by June, then a drop to 1.08 by March as U.S. cyclical growth returns.
SocGen and Rabobank warn EUR/USD could test parity due to capital inflows favouring the U.S..
BBVA Research suggests a fair-value band between 1.10 and 1.20, with normalisation around 1.20.
In summary, if global economic momentum shifts back to Europe and the Fed remains dovish, projections toward $1.20–1.30 by mid‑2026 are plausible.
However, should growth in the U.S. surpass expectations, experts warn that the euro might drop to a range of $1.05 to $1.10, potentially nearing parity if the Fed adopts a more hawkish stance.
Risk management is essential: a rebound in USD or surprise U.S. growth data could reverse EUR/USD gains.
International investors in U.S. equities have benefited significantly from euro strength; those holding eurozone assets, however, may see reduced export earnings.
Forex traders should monitor upcoming U.S. CPI, ECB commentary, geopolitical developments and tariffs for potential volatility.
In conclusion, the euro is significantly stronger than the dollar in 2025. However, whether this trend continues depends on the central bank's actions, geopolitical tensions, and broader investor sentiment.
Models suggest a possible range between $1.12 and $1.30, reflecting various economic scenarios. For investors and businesses, the key takeaway is to monitor Fed-ECB divergence, hedge exposures, and consider international diversification as the backdrop shifts.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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