The euro has strengthened against the US dollar, surpassing the $1.05 mark and nearing levels not seen since mid-December. This upward movement is largely attributed to the anticipation of increased defense expenditure by European nations.
Ursula von der Leyen, President of the European Commission, unveiled the EU’s new strategy aimed at bolstering Europe’s defense industry. This initiative could potentially mobilize close to €800 billion. Furthermore, the proposal includes allowing member states greater budgetary leeway for defense investments, complemented by €150 billion in loan facilities to support these endeavors.
These developments occurred in a global economic landscape marked by trade tensions. Earlier, President Trump had suspended military assistance to Ukraine following a public disagreement with Ukrainian President Volodymyr Zelensky. Simultaneously, the market is digesting the implications of an escalating trade dispute, with the United States imposing new tariffs on goods from Canada, Mexico, and China. These measures have already triggered retaliatory actions from Canada and China, adding complexity to the international trade environment.
In the realm of monetary policy, the European Central Bank (ECB) is widely expected to announce a fifth consecutive reduction in borrowing costs later this week. This anticipated move adds another layer of influence on the euro’s valuation against the dollar and other currencies.
On Tuesday, March 4th, the EURUSD exchange rate experienced an increase of 0.0042, or 0.40%, reaching 1.0528, compared to 1.0487 in the previous trading session. Historically, the Euro to US Dollar exchange rate has fluctuated significantly, hitting a record high of 1.87 in July 1973. While the euro as a physical currency was introduced in 1999, synthetic historical data allows for analysis extending back further, based on weighted averages of predecessor currencies. The latest data for the Euro US Dollar Exchange Rate was updated on March 4, 2025.
Currently, projections from Trading Economics’ global macro models and analyst forecasts suggest that the EURUSD exchange rate is expected to trade around 1.03 by the end of the current quarter. Looking further ahead, estimates point towards a potential level of 1.02 within 12 months.
