Morgan Stanley analysts forecast further strengthening of euro

According to Bloomberg-surveyed experts, the euro is currently posting its best performance in two decades. Last month, it rose to $1.15 against the dollar—its strongest level since 2021.

Several factors are driving the euro's strength. Among them is US President Donald Trump's decision to reduce military support for Europe. This move has led the German government to abandon years of fiscal austerity and launch a 1 trillion euro (approximately $1.1 trillion) spending plan.

In addition, the US administration has imposed a series of tariffs aimed at restructuring global trade. This move raised recession risks for the American economy. Subsequently, the euro gained alongside traditional reserve currencies, while the dollar and US Treasuries sold off.

According to Morgan Stanley analysts, Germany's fiscal stimulus serves as the key driver attracting capital to Europe's economy. The experts note the euro still has further upside potential.