FX.co ★ Euro Strengthens to 2-Week High on USD Weakness

The euro rose above $1.13, marking its highest point since May 6, as broad weakness in the US dollar prevailed following Moody’s decision to downgrade the US credit rating. The downgrade reflects rising concerns over increasing government debt and expanding fiscal deficits. Meanwhile, in Europe, the European Central Bank's Financial Stability Review, set for May 2025, emphasized mounting worries about the financial stability of the euro area. The report highlighted issues such as escalating geopolitical tensions and ongoing policy uncertainties. It warned that a weakened economic outlook and trade disruptions could adversely impact businesses and households. Additionally, the ECB cautioned that new spending demands, including heightened defense budgets, might jeopardize the sustainability of long-term debt. Earlier in the week, investor sentiment was positively influenced by news of a provisional agreement between the EU and the UK on vital matters, such as defense and security collaboration, fisheries, and youth mobility.