(BFM Stock Exchange) – The motto of the euro zone has won 4.6% against the greenback since the start of the year, thwarting the forecasts which anticipated a fall or even a return to parity, this year. But can this renewed euro form last?

The year 2025 promised to be difficult for the euro against the dollar. The various design offices agreed on a forecast: the Euro zone currency was still a party to suffer against the greenback.

This due, in particular, of the inflationary impact of policies (customs surcharges, immigration restrictions) that the Trump administration had to set up. Several strategists saw the euro falling to parity in the face of the dollar (that is to say to a dollar for a euro) or even below.

For the time being, the European currency completely thwarts these forecasts. Since the start of the year, the euro has taken 4.6%

a significant increase in the foreign exchange market. From a hollow to 1.0178 dollars in January, the Euro zone currency has now raised 1.0836 dollars.

The Euro reporta has been very brutal, especially since the end of February. So in a few days.

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European actions surprise and Trump disappoints

Some forces had already started to exercise previously. “Since the beginning of the year, the momentum (the dynamics, note) is clearly on the European side … and therefore of the Euro”, explains William Gerlach d’Ibanfirst.

“It all started when the American investment funds decided to sell American stocks-at a faster rate than when correction of 2022-to buy European actions decreased by 40%. Flows to Europe were so important that this structurally supported the euro, despite the risks of trade war and geopolitics,” he explains.

Since the beginning of the year, European actions outperforms strongly Wall Street. The Eurostoxx 50, a pan -European index earns 8.2% when the S&P 500 loses 2.8%.

William Gerlach also talks about some positive European indicators, such as inflation in the euro zone and a manufacturing sector that finds colors.

Opposite, the United States and Donald Trump have disappointed. Barclays evokes American indicators who point to a slowdown in the American economy, “the fainting of the hopes of an additional American revival” or even “erratic customs policies”.

“The fundamental elements of the Trump plan were supposed to be added to the upward structural dynamics of the dollar. But the implementation has left less room for budgetary maneuver and has triggered powerful reactions from political partners. The confidence of economic actors was also undermined. The back and forth on customs tariffs have raised questions about the persistence of the political tool.”

Europe shows the fangs, the euro flies away

The recent flight of the Euro is mainly due to the response of Europeans to the foreign and military policy of Donald Trump. On February 28, the American president caused a world shock wave by being aggressive with his Ukrainian counterpart, Volodymyr Zelensky, summoning him to agree with Russian President Vladimir Putin. And this in front of cameras around the world. Zelensky left the meeting, and the agreement which was to be established between Ukraine and the United States was returned to the Greek calendars.

This meeting accelerated European initiatives in cooperation and defense. For the past few weeks, leaders have raised significant increases in military spending, aware that the security of the old continent would depend in the future much less in the United States and much more on their own.

The day of February 28 served as a catalyst. Two days later, Emmanuel Macron mentioned a target of defense spending ranging from 3% to 3.5% of the gross domestic product (against 2% for the time being within NATO).

On Tuesday, the European Commission unveiled its “rearmer Europe” project which intends to mobilize nearly 800 billion euros in the defense.

On the same day, Germany acted a major break. The political parties in charge of training the future government coalition announced a vast investment project in defense and infrastructure, for amounts combined around 800-900 billion euros. In a few days, the country ended decades of budgetary frugality.

“Perhaps if the meeting of Friday (February 28, editor’s note) at the White House had never taken place, we would never have known such a level of mobilization in Europe. However, it is clear that Europe finally understood the message: de-risquer ‘vis-à-vis the United States requires a substantial commitment of resources,” comments Barclays

With these upcoming expenses, the yields of sovereign bonds in Europe have taken off. On Wednesday, the rate of the debt title at 10 years has experienced its highest increase in a day since the months following German reunification (1990). The 10 -year -old French went from 3.09% on Friday, February 28, at 3.51% on Friday.

Mechanically, higher yields result in an increase in the currency of the countries in question. Investors in search of return have more interest in placing their funds there and therefore buy these obligations (and therefore by ricochet of the euro).

Ultimately, the Euro followed the incredible rhythm of the political announcements that occurred in just a few days. “The prospect of a European reset excites investors,” comments William Gerlach. The European currency took 1.07% against the dollar on Monday, then 1.32% Tuesday and 1.6% on Wednesday, an impressive succession on the foreign exchange market.

Prudent barclays and ubs

As with any movement of strong progression, the question remains whether and to what extent the leap of the euro can continue.

“Can all this fall like a soufflé? It is not excluded. The good performance of European actions, which is certainly the most important element to allow the euro to maintain itself at high levels, can tumble if we are witnessing a more accentuated fall of American actions”, considers William Gerlach. “Historically, when American actions collapse, it is sooner the turn of European actions. In this circumstance, it is difficult to see the Euro playing the role of refuge. Logically, investors could fall back on the US dollar,” he continues.

Barclays is prudent. “Unless American data deteriorates more, we believe that most of the Euro increase is behind,” writes the British bank.

“The feeling has evolved spectacularly in favor of the common currency and against the dollar. However, we show that, taking into account the customs prices, a movement around 1.10 for the Eurodollar would be equivalent to a movement above 1.15 in the negotiation configuration before Trump,” said Barclays. In other words, type the $ 1.10 for the euro would prove to be extremely demanding, according to the British bank.

UBS judges that the rally experienced by the euro seems “exaggerated”. The Swiss bank believes that once customs surcharge on European imports are implemented by the Trump administration, the Euro zone motto will fall again against the dollar. UBS Table on a Eurodollar at 1.02 at the end of June and 1.06 at the end of December.

Deutsche Bank “goes to purchase”

Bank of America, for its part, judges that an increase potential still exists on Eurodollar, especially if Europe acts of new reforms (and not only on the budgetary level) or if a peace agreement in Ukraine occurs (because this could cause a drop in energy prices).

The American bank sees Eurodollar at 1.15 to the end of December 2025 and 1.20 at the end of 2026.

George Saravelos, a strategist currencies at Deutsche Bank, and who was recently recommended (February 25) to buy the dollar against the euro changed his rifle. He now advises to play the Euro increase up to a rate of 1 euro for $ 1.10.

The strategist thinks that customs surcharge will no longer wear the dollar. Simply because these customs duties also penalize, ultimately, the American economy. “Even if new customs duties are announced, the market will also evaluate economic risks downwards for the United States,” he said.

He also quotes political risks that can weigh on the dollar, such as a thin majority in the congress (which can complicate the implementation of an effective budgetary policy) or uncertainties linked to “DOGE”, the “Department of efficiency” piloted by Elon Musk which intends to cut the ax in American federal expenses. In addition, George Saravelos does not exclude that the dollar has “lost its status of refuge value”, adding not “writing this lightly”.

“On the other hand, Europe and Germany in particular show unprecedented responsiveness in history to revise their budgetary kiss,” he explains.

“This flexibility should not only alleviate the potential impact of future tariffs to come (Germany being the most exposed), but also create a bias bias for growth (and, by extension, for the European Central Bank) once the impact of customs tariffs has been absorbed,” he said.