Why Has The Euro Been Growing So Strongly Since Trump Entered Office?

It is no secret that the USD has been struggling lately against the second major currency. A lot has happened since Trump took office, and among the most noticeable events, the depreciation of the dollar against the Euro has been a subject of talk among traders and investors.  

A lot has happened in a relatively short period of time. While some of the euro’s strength can indeed be linked to policies and rhetoric coming from Washington, other drivers stem from structural shifts in Europe and broader global capital flows.  

Therefore, the Euro vs US dollar rally is not just a “Trump effect” it is the result of layered economic, geopolitical, and financial dynamics. 

Why Euro Has Been Growing Strongly Since Trump Entered Office? 

Let’s take a deeper look at what has truly fuelled the EUR appreciation and how long this trend could realistically continue. 

1. Weakening U.S. Dollar Sentiment Under Trump 

Markets have grown wary of President Trump’s aggressive tariff regime, fiscal policy expansion, and frequent criticism of the Fed’s (Federal Reserve) independence.  

These factors have eroded confidence in the dollar and caused USD to EUR rates to rise, meaning more dollars are required to buy the same amount of euros as months before.  

However, since Trump’s return to office, markets have grown increasingly wary of: 

• Aggressive tariff policies 
• Expansionary fiscal spending 
• Public criticism of the Federal Reserve 
• Policy unpredictability 

Since January of 2025, we have witnessed a consistent trend of a depreciating dollar against the euro, driven by geopolitical and economic unpredictability in the U.S.  

Uncertainty is always damaging for currency, especially for the world reserve currency that is closely watched by investors all over the world.  

A Reuters poll forecasts even more decline with the EURO vs US dollar to potentially reach 1.17 in the following year.  

2. Trump Tariffs 

Tariffs have been the primary cause behind red days in the US stock markets. 90% of the crashes were caused by tariff announcements as investors feared their favorite companies could lose their revenue because of increased costs for manufacturing.  

Each major tariff announcement sparked fears of: 

• Supply chain disruptions 
• Rising input costs 
• Lower corporate margins 
• Retaliatory measures from trading partners 

Tariffs cause international trade tensions, which triggered a safe-haven flow into the euro. Investors try to avoid highly risky assets like USD and US stocks and seek to protect their capital by investing in more stable currencies and assets.  

Hence, we got another Euro, Bitcoin, and Gold rally. As a result, the EUR climbed strongly from March, especially in April, following Trump’s tariff announcements.  

The EU tone was very professional and calm during these announcements, positively affecting investor confidence in the EU economy.  

3. EU Policies And Investor Confidence 

Germany has initiated a new fiscal stimulus program, and the EU leadership’s push for broader euro-denominated debt issuance has greatly improved investor sentiment toward Europe as a stable place for investments.  

The stock markets and bonds in Europe have experienced a sharp rally, helping support the EUR. ECB President Christine Lagarde saw this period as a strategic opportunity for the euro to assert its global reserve role, which reinforced trust in the currency. 

4. EUR As A Reserve Currency 

The Euro’s strength is not just about the dollar being weaker, which is the case as well, but it also reflects growing demand for euro-denominated assets.  

As global reserve portfolios diversify and the EU pushes for the euro as a new reserve currency, it has gained relative weight, enhancing its valuation. Trump’s announcement to increase taxes on foreign investments also accelerated this trend.  

As a result, all fundamentals point toward an even stronger euro in the near future, and unless the dollar is supported by stronger policies from the USA.  

The most logical way for the EURO vs US dollar is to continue moving upwards to the 1.17 psychological level. 

Renewed trade tensions have accelerated Europe’s path toward strategic financial autonomy and credibility as a stable currency.  

5. The Euro’s Growing Reserve Currency Role 

Perhaps the most structurally important factor is diversification away from the U.S. dollar in global reserves. While the dollar remains dominant, central banks worldwide have been gradually diversifying holdings.  

Geopolitical tensions, sanctions frameworks, and rising U.S. debt levels have encouraged many countries to: 

• Increase euro allocations 
• Add gold reserves 
• Explore alternative settlement systems 

Trump’s announcement to increase taxes on certain foreign investments further accelerated diversification incentives. 

When reserve managers shift even a small percentage of assets away from USD and into EUR, the impact on currency markets can be substantial due to the scale involved. 

This dynamic reflects not just cyclical weakness in the dollar but a gradual structural adjustment in global capital architecture. 

6. Market Psychology And Technical Momentum 

In addition to fundamentals, technical factors have amplified the move. 

Once the EURO vs US dollar broke key resistance levels: 

• Algorithmic trading systems entered long positions 
• Hedge funds increased their exposure 
• Retail traders followed momentum 

Psychological levels, such as 1.10 and 1.15, often act as catalysts. As traders now discuss 1.17 as a potential target, expectations themselves become part of the price action. 

Momentum can extend rallies beyond what short-term fundamentals justify. 

7. How Long Can The EUR/USD Uptrend Continue? 

Looking ahead, several variables will determine whether the EURO vs US dollar continues toward 1.17 and beyond: 

1. Bullish Scenario For EUR 

• Continued U.S. policy uncertainty 
• Expanded tariffs or trade conflicts 
• Fed rate cuts outpacing ECB adjustments 
• Sustained European fiscal coordination 
• Ongoing reserve diversification 

2. Bearish Scenario For EUR 

• U.S. economic resilience outperforms expectations 
• Inflation resurgence forces the Fed to stay hawkish 
• EU growth slows significantly 
• Political fragmentation within Europe re-emerges 

Currencies rarely move in straight lines. Even in strong trends, corrections are inevitable. 

However, unless the U.S. implements stabilizing fiscal measures or restores stronger institutional confidence, the path of least resistance for EUR/USD may remain upward in the medium term. 

Euro VS US Dollar: Which Is Stronger?

In summary, the euro’s appreciation in 2025 is not the result of a single policy or headline. It reflects a convergence of factors: 

• Firstly, negative sentiment surrounding U.S. fiscal and trade policies 
• Secondly, reduced confidence in dollar stability 
• Thirdly, Europe’s fiscal stimulus and structural reforms 
• Fourthly, a stronger demand for euro-denominated assets 
• Fifthly, the growing diversification of global reserves 
• Finally, momentum-driven technical flows 

While Trump’s policies have undeniably contributed to dollar weakness, the euro’s strength also stems from Europe’s own strategic positioning and improved investor perception. 

Ultimately, the EUR rally represents both cyclical dollar softness and deeper structural shifts in global finance. 

If these trends persist, the 1.17 psychological level may not be the ceiling but merely another milestone in a broader currency realignment.