Weaker US dollar creates additional hurdle for exporters
The US dollar has continued to weaken against the euro this week, presenting extra challenges for exporting firms.
Having strengthened in the immediate aftermath of Donald Trump’s election victory last year, the dollar has steadily slipped against the euro since the start of 2025.
Compared to mid-January, the euro is currently up almost 15% against the US currency.
“There’s been a number of factors contributing to it but a lot of it has to do with the presidency of Donald Trump,” said Roman Ziruck, senior market analyst at Ebury.
“Markets are concerned with the trade issues – we see that the US has moved on to a trade protectionism path and this is something that is casting shadows on its economic prospects,” he said.
“Also markets have been relatively concerned with the US fiscal situation – the US has been running significant fiscal deficits in recent years, even though its economic activity has been rather strong. So it’s quite uncharactaristic of the period. And the One Big, Beautiful Bill, which passed the Senate just yesterday, is promising to increase the US debt in the coming years,” he added.
Markets are also uneasy about attempts by the US President to influence central bank policy – through his criticism of their interest rate stance, and indications that he is considering a change in the Federal Reserve’s leadership.
“This is something that we have not really witnessed in developed economies in recent years,” said Mr Ziruck. “This is something that we are more likely to see in emerging markets – but even in those places it’s not particularly common.”
With a deadline on US-EU trade talks looming, and suggestions that a 10% tariff will become the “new normal” for firms, a weaker dollar presents an extra level of pressure on exporting firms.
“It’s another hurdle,” he said. “The EU is an exporting economy – it’s going to be an issue, it’s something that is leading to a deterioration in the economic prospects in the near term. But longer-term prospects are helped by [Germany’s] fiscal stimulus.”
The weaker dollar may offer some relief to consumers in certain areas, though, not least those that are travelling to the US in the coming weeks.
Given that oil is priced in dollars, it also presents a potential benefit there too – especially as global oil prices have fallen back from their recent highs in the wake of attacks between Israel and Iran.
“We have seen a significant reversal in the oil futures and right now we are back to levels where we were before the onset of the Israel-Iran conflict,” said Mr Ziruck.
“If we price that in euros, that certainly is a factor that should be contributing to a slightly calmer price environment in the euro zone,” he added.
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