Euro exchange rate

In 2025, the US dollar to euro exchange rate is estimated at 1.03 euros per dollar, reflecting a 3.2% annualized increase over the previous five years driven by ongoing global macroeconomic volatility and shifting monetary policy. The appreciation of the euro relative to the US dollar this year is tied to narrowing economic divergence between the Eurozone and United States, coupled with more aggressive monetary tightening by the US Federal Reserve during recent years. Recovery in European economic fundamentals and the easing of some inflationary pressures have contributed to renewed demand for the euro among global investors, especially as expectations of continued US rate hikes have diminished.

Between 2020 and 2025, the exchange rate declined sharply early in the period as pandemic-driven policy responses and international economic stressors put substantial pressure on both currencies. In the wake of the pandemic, the euro temporarily appreciated against the dollar due to aggressive US interest rate cuts and EU stimulus programs. Subsequent global supply chain disruptions, the spread of inflation, and Russia's invasion of Ukraine generated further volatility, compelling central banks to reevaluate their monetary strategies. The Federal Reserve's rapid rate increases in 2022 prompted a notable shift in investor sentiment, with the dollar gaining on the euro in response to higher yields on US assets. The euro's value fell 12.5% in 2022, at one point reaching parity with the US dollar, before appreciating modestly in 2023 and stabilizing through 2024 as relative risks and returns evened out. By 2025, the US dollar had depreciated somewhat as European growth improved and expectations of less-aggressive US policy shifts surfaced, sparking renewed strength in the euro.

Other key macro trends during this period included persistent geopolitical uncertainty, changes in global energy prices disproportionately impacting Europe, and the growing importance of current account surpluses for currency resilience. The high sensitivity of currency flows to interest rate expectations and global risk sentiment, as well as the impacts of political crises and recovery funds within the Eurozone, were critical drivers of the exchange rate trajectory leading to 2025.