Recently analyzing the long-term trend chart of the euro, I found that the story over the past 20 years has been quite fascinating, with various economic crises and policy shifts leaving deep marks on the exchange rate. I want to organize these observations and also discuss the potential for euro investments in the future.

Let's start with the 2008 wave. At that time, the euro against the US dollar surged to a historic high of 1.6038 in July, then began a steady decline. The US subprime mortgage crisis triggered a global financial tsunami, affecting the European banking system as well, leading to credit tightening and a large capital flight to the US for safety. Worse still, many eurozone countries launched stimulus plans to combat recession, causing fiscal deficits to soar. Although the European Central Bank initiated quantitative easing, this also increased downward pressure on the euro. Later, debt problems in Greece, Ireland, Portugal, and others surfaced, thoroughly shaking market confidence in the entire eurozone.

After nearly nine years of decline, the euro bottomed out at 1.034 in January 2017 before rebounding. At that time, the ECB’s easing policies began to take effect, and economic data in the eurozone improved—unemployment fell below 10%, manufacturing PMI broke through 55, all positive signals. Plus, 2017 was a major election year for key European countries, and markets were optimistic about pro-European governments coming to power. The Brexit negotiations also temporarily eased uncertainty. Another key factor was that the euro was severely oversold—down more than 35% from its 2008 high—laying a solid foundation for the rebound.

By February 2018, the euro briefly rose to 1.2556, hitting a new high since 2015. But this peak didn’t last long. The Fed began raising interest rates, the dollar index strengthened, and eurozone economic growth started to slow, with manufacturing PMI retreating from around 60. Political instability in Italy also dampened investor confidence, gradually pressuring the euro exchange rate.

2022 marked another turning point. In September, the euro fell to 0.9536, hitting a 20-year low. At that time, the Russia-Ukraine war heightened risk aversion, energy prices in Europe soared, corporate costs increased, and inflation surged. However, the ECB raised interest rates twice in July and September, ending eight years of negative interest rates, which provided some support for the euro. As energy supply chains gradually adjusted and energy prices declined in the second half of the year, the euro also started to rebound.

By early 2025, the euro faced renewed pressure, falling to around 1.02. The main reasons were concerns about the eurozone’s economic outlook—Germany’s economy contracted for two consecutive years, and France’s manufacturing activity dropped to its worst level since May 2020. More critically, divergence in policies between the Fed and the ECB emerged: the US economy remained strong, with the Fed slow to cut rates; the eurozone economy was weak, yet the ECB was set to significantly lower interest rates. This widening interest rate differential led capital to flow into the dollar, weakening the euro. Additionally, tariffs stemming from Trump’s policies put pressure on Europe’s export-driven economy.

However, this year, the situation changed. At the end of January, the euro broke through 1.20, reaching a new high since June 2021. Interestingly, this rally wasn’t driven by euro strength alone but by a broad weakening of the dollar. Trump’s frequent attacks on the Fed’s independence and threats to impose tariffs on allies raised concerns about US policies, prompting investors to “sell the US.” Meanwhile, market expectations were that the Fed would continue cutting rates, while the ECB might hold steady due to relatively stable inflation, narrowing the US-Europe interest rate gap and boosting the euro.

Looking ahead to the euro’s future trend, I believe several key variables are worth monitoring. First, the divergence in US and European monetary policies—if the Fed continues to cut rates while the ECB remains on hold, the narrowing interest rate differential could support the euro. Second, Germany’s fiscal expansion plans are crucial for eurozone growth; if implemented smoothly, they could push the euro-dollar exchange rate back to 1.20–1.25. The third factor is geopolitical risks and energy prices—if tensions ease and energy prices fall, it would benefit eurozone trade conditions and corporate costs, potentially boosting economic growth by 0.2–0.5 percentage points.

Overall, I expect the euro to perform somewhat stronger this year. Especially if the Fed continues to cut rates, the US-Europe interest rate gap shrinks further, energy prices decline, and geopolitical risks ease, the euro’s rebound momentum will be more pronounced. However, a sustained strong upward trend remains challenging, given ongoing structural issues within the eurozone.

For investors interested in euro exposure, Taiwanese investors have several options. The simplest is opening a forex account through a bank to trade, though typically only long positions are available, not shorting. For more flexible trading, consider CFD platforms offered by international forex brokers, which have low capital requirements and are suitable for small investors. Some securities firms also provide forex trading services, or you can trade euro futures on futures exchanges.

Going forward, it’s advisable to keep an eye on US-Europe interest rate differentials, Germany’s fiscal stimulus progress, and geopolitical and energy-related risks. The accuracy of euro trend forecasts largely depends on how these macro factors evolve. If you’re interested, you can track real-time euro quotes and related assets on platforms like Gate or others.