The euro’s appreciation: causes, outlook and consequences

Tuesday 12 September 2017

Research / Market

The euro’s appreciation: causes, outlook and consequences

The euro remains undervalued according to the majority of valuation models and is boosted by a domestic economy that has strengthened considerably since the beginning of the year. It is not the euro’s value that is a surprise, but the speed at which the currency has appreciated since early May. Even though it is clear that the euro’s recent rise is due to factors outside the Eurozone (widespread weakness of the US dollar and sterling, in particular), we believe that the increase we have seen year-to-date is in large part due to the improvement in eurozone fundamentals and its basic balance surplus.