ECB warns: Strong euro could endanger euro zone economy!

ECB warns: Strong euro could endanger euro zone economy!

On July 1, 2025, top officials at the European Central Bank (ECB) warned of the potential negative impact that the rising euro exchange rate could have on the economy. In particular, ECB Vice President Luis de Guindos stated that a rise in the euro to $1.20 could largely be ignored. However, with higher exchange rates, the situation becomes more complicated, as he emphasized in an interview with Bloomberg TV. The euro has appreciated by around 9% against the US dollar since April and is up a total of 14% since the beginning of the year. According to the latest market reports, the euro was trading at $1.18 on Tuesday.

Similar to the past few months, the appreciation of the euro has a lot to do with the uncertainty caused by US President Donald Trump's economic policy. However, this strong euro could have significant consequences for the euro zone. A strong currency makes exports more expensive and imports cheaper, which can slow growth and reduce inflation. The ECB is actively responding to this challenge.

Risks for the export economy

In this context, Martins Kazaks, the head of the Latvian Central Bank, noted that a planned tariff of 10% on many exports in a trade agreement with the USA could additionally influence export dynamics. Overall, ECB boss Christine Lagarde is concerned about the economic prospects in the euro zone, which appear to be clouded in the short term by the trade conflict with the USA.

Lagarde warned that a combination of higher tariffs and a stronger euro could dampen exports and delay investment decisions. These developments are driving uncertainty on the financial markets.

ECB interest rate policy

The ECB recently cut the deposit rate by a quarter point to 2.00% to address the current situation. In addition, the bank will decide on the key interest rate on July 24, with financial markets expecting a break in interest rates, as Lithuanian central bank chief Gediminas Simkus announced.

Further information about the euro exchange rate and ECB statistics can be found on the website ECB.

For detailed insights into current developments and their impact on the markets, refer to TradingView on the most important aspects of this dynamic.