Why the euro is surging right now

Personal intro:
Lately, I’ve noticed the euro surging to levels we haven’t seen in years, and I wanted to understand why. Here’s a clear and detailed overview of the factors behind this rise.

Main reasons:

1. Weakened US dollar & uncertainty:
   – The dollar has had its worst start to a year since 1973
   – Investors are using the euro as a hedge amid US policy volatility

2. Favourable interest rate differential:
   – While the ECB paused post-cut cycle, the Fed is expected to maintain or delay cuts
   – Economic strength in the eurozone supports a stronger currency .

3. German fiscal stimulus:
   – Germany’s new large-scale defense and infrastructure plans boost investor appetite 
   – Combined with US uncertainties, euro becomes more attractive .

4. Global reserve currency role:
   – A shift of reserves towards euro assets could be substantial
   – The current ~1.18 USD/EUR rate is manageable, but further gains above ~1.20 may worry exporters

My insight:
A strong euro helps with imports and inflation control, but export-driven economies could face pressure. Note: the ECB is closely watching, but hasn’t intervened directly