Euro Resilience Tested by Energy Shocks and European Politics
The euro's resilience against the dollar is being put to the test by global energy shocks and growing political risks in Europe. Despite recent declines, analysts say the currency remains supported by a strong economy and a potential US rate hike.
However, the Iran war has hurt the euro this year, causing liquefied natural gas shipments through the Strait of Hormuz to be choked off, sending European gas prices above €80 per megawatt hour. Kaspar Hense, senior portfolio manager at RBC BlueBay Asset Management, notes that commodity forecasters predict gas prices will remain in the 85-100 range, which could keep the euro below $1.14.
Rabobank's Jane Foley is concerned about the euro's outlook due to German Chancellor Friedrich Merz's reeling from recent state elections and potential political gridlock in France ahead of a presidential election in 2027.