FX Focus EUR

While the EUR has remained resilient due to global risk appetite, rising energy risks and structural export weakness threaten this stability. Downside risks for EUR-USD are increasing as political and monetary policy factors could shift against the currency later this year.

Key Takeaways

• 1.Energy price shocks (oil/gas) represent a key near-term risk that could trigger EUR depreciation.
• 2.The eurozone's export competitiveness is deteriorating as companies shift manufacturing and capital investment to markets like China.
• 3.Monetary policy divergence may shift in favor of the USD if markets start pricing earlier ECB easing for 2027.

Table of Contents

• Cyclical outlook: risk appetite masks underpriced rate risks
• Structural factors: weakening external balances and eroding competitiveness
• Policy uncertainty: political risk can rotate back to Europe
• Conclusion: the EUR is stable, but the foundations look more fragile