The euro against the US dollar is at its highest level since 2021. This has implications for European businesses and consumers. Should the European Central Bank (ECB) intervene?
The US dollar continues to lose value against other major currencies, following the trend of 2025. Last year, the US currency recorded its strongest loss in almost a decade. The minus against a group of other currencies in 2025 amounted to about 10 percent. Since the beginning of 2026, the decline has been another minus 2.6 percent. The loss of the dollar’s value has consequences for the euro and other currencies. The European single currency has reached the value of 1.20 US dollars for the first time since 2021. The British pound and the Japanese yen have also risen against the dollar to the highest levels.
Some economists and analysts explain the continued losses in the dollar’s value with investors’ lack of confidence in the US currency, as the unpredictability of President Donald Trump’s policy continues to give cause for concern.
There is another view, according to which Trump himself and many members of his economic team want a depreciation of the dollar, in the hope that US exports will be priced more favorably and thus increase competitiveness. Trump has not tried to refute this assumption. On the contrary, when asked this week if he is worried about the weak dollar, he replied: “No, it’s very good.” Stephen Miran, former chairman of Trump’s economic advisory staff and now a member of the Federal Reserve Board of Governors, published a “Guide to Restructuring the Global Trading System” in November 2024. Tariffs and dollar depreciation were presented as important instruments to reduce the US trade deficit.
The weakening dollar is not only affecting the US economy, but also has consequences for the eurozone economy and the euro. The common currency gained 13 percent against the dollar in 2025 – the strongest increase since 2017. The strengthening of the euro plays “an important role for economic performance, the labor market and the financial position of budgets” in the EU, says Jack Allen-Reynolds, deputy chief economist for the eurozone at Capital Economics. “A stronger euro reduces the competitiveness of exports, which hurts producers in the region,” Allen-Reynolds tells DW. “On the other hand, imports are cheaper, which leads to lower prices for consumers.”
Ricardo Amaro, chief eurozone economist at Oxford Economics, warns that a further appreciation of the euro against the dollar could increasingly affect the competitiveness of European companies that export to the US. This is indeed offset by the favorable price of US products in Europe, according to Amaro. But overall, the current exchange rate, if it remains the same, would have a negative effect on economic growth in Europe.