The euro has surged past $1.20 for the first time in more than four years, fuelled by Donald Trump's tariff‑laden presidency and a slide in the dollar.
The jump came after the US president expressed indifference to the greenback's latest decline, saying the currency "is doing great".
Launched in 1999 at $1.17, the single currency climbed to a record above $1.60 during the 2008 subprime crisis, when the US unit weakened sharply.
It had not crossed $1.20 since 2021, when European economies were buoyed by extraordinary pandemic‑era public spending.
A stronger euro brings clear winners and losers across the bloc, lifting household purchasing power but weighing on exporters who depend on cost competitiveness abroad.
- Good for households -
A large share of eurozone imports are priced in dollars, including oil and most raw materials.
A firmer euro therefore makes imports cheaper, helping consumers.
"A stronger euro supports the purchasing power of European households, boosting consumption and tourism abroad," said John Plassard, investment strategy head at Cite Gestion Private Bank.
Americans, by contrast, lose out when travelling in the eurozone or buying European goods, more so if additional taxes imposed by the Trump administration apply.
Plassard added that a stronger euro benefits import‑reliant companies, notably in chemicals, construction, aviation and energy‑intensive industries.
- Bad for exports -
"By contrast, it is a headwind for exporters, notably autos, machinery and capital goods," Plassard said.
It is also a drag on luxury brands like LVMH, "which are already facing pressure on demand", said Kathleen Brooks, an analyst at XTB.
Germany, whose economy depends heavily on exporting industrial equipment and vehicles, is particularly exposed.
EU firms are already contending with a 15-percent tariff on their exports to the United States, introduced under a deal sealed in July.
A weaker euro would boost inflation, while a stronger single currency pushes it down, which could prompt the European Central Bank to consider further rate cuts, potentially making credit cheaper for households and businesses.
- A chance to gain ground? -
France's central bank governor Francois Villeroy de Galhau warned in October that Europe should "not be naive" in thinking the euro "will soon replace the dollar".
Still, without supplanting the greenback as the world's main reserve and trade currency, a stronger euro boosts the appeal of European debt.
European states could then enjoy a share of the "exorbitant privilege" long held by the United States -- a term coined by former French president Valery Giscard d'Estaing to describe Washington's low borrowing costs thanks to the dollar's dominance.
But Ipek Ozkardeskaya of Swissquote Bank told AFP that rising populism undermines budget discipline and remains a "potential barrier" to the rise of the euro and other currencies, with global investors preferring tangible assets such as commodities.
- What's behind the rise? -
A year ago, the euro flirted with parity as the dollar strengthened on expectations that Trump‑era tariffs would push up US inflation and in turn interest rates.
Since his inauguration, however, the euro has gained 15 percent, as investors recoil from Washington's unpredictable policy mix: military and tariff threats, abrupt policy shifts and pressure on the Federal Reserve to cut rates, raising questions about its independence.
Domestic tensions, notably after a second US citizen was killed by a federal immigration agent over the weekend, have also revived fears of a new budget shutdown.
"By contrast, Europe appears as a zone of relative institutional stability," Plassard said.
