ING analysts believe that the European Central Bank’s expansion of its EUREP repo facility could strengthen the euro’s international standing and support a higher EUR/USD rate over the medium term. Greater global demand for euro-denominated assets and increased use of the euro in trade invoicing are seen as structural factors underpinning the currency.
A key debate is whether the ECB’s ambition for a stronger global euro also implies tolerance for a stronger nominal exchange rate. Officially, the focus will likely remain on how euro appreciation affects the inflation outlook. If a stronger euro leads to inflation undershooting, rate cuts could become part of the discussion.
However, ING argues that such concerns would only become serious if EUR/USD approaches much higher levels, closer to 1.25. In the current geopolitical environment, strengthening the euro’s global role appears to take priority, and the sensitivity toward euro strength seems lower than in previous decades.
That said, some governments, including France, remain cautious. A stronger euro could weigh on export competitiveness, particularly for economies reliant on external demand, and policymakers may seek further economic assessments before fully embracing that shift.
ING’s baseline scenario sees EUR/USD ending the year around 1.22, with upside risks. This outlook reflects a broadly constructive view on the euro’s trajectory against the US dollar.
