This is good news for French tourists vacationing abroad. The euro hit a new record on July 14. The European currency has advanced this year against the currencies of the main tourist destinations (USA, Canada, Thailand, Turkey, Japan, etc.).

The world’s second largest currency has recently benefited from the dollar’s bubble, which is down 2% last week and 3.5% this year. Markets anticipate that the Federal Reserve, unlike the ECB, is nearing the end of its rate hike cycle.

“Our forecasts of a rise in the euro to $1.15 by the end of the year and $1.20 in 2024 are essentially based on a depreciation of the dollar and not on the development of the European currency,” estimates George Saravelos, strategist at Deutsche Bank.

pre-war level in Ukraine

At $1.125, the euro returned to pre-war Ukraine levels. That shock wave had caused the dollar to fall below par with the dollar, its lowest level in twenty years.

The European currency also gained 9% against the yuan and 11% against the yen. In the major BRICS currencies space, the European currency rose 4% and 28% against the Indian rupee and ruble, respectively.

The nominal global exchange rate calculated by the European Central Bank (ECB) rose by 4% this year, surpassing its 2009 peak. However, it performed less strongly than inflation (+5.5%). In real terms, i.e. adjusted for inflation, the euro remains well below (-18%) its peak in 2008.

Poor prospects

The economic prospects for the eurozone, and in particular for its largest economies, do not come close to justifying such a strength of the European currency. The likely recession in Germany in 2024 and weak activity in France bode well for a sluggish year in Europe.

Robin Brooks, chief economist at the Institute of International Finance, said on Twitter that “the euro is grossly overvalued given deteriorating economic fundamentals. When an economy suffers a shock, its currency is supposed to fall to cushion it, thereby making its exports more competitive. Which is currently not the case.

The forthcoming rate hikes by the European Central Bank will support the single currency, which will help lower inflation but increase the risk of a recession. A strong euro would then be synonymous with economic weakness.

With inflation and stagnation in economic activity, people are not very enthusiastic about the economic situation in Europe. One in two Europeans thinks it is bad and six in ten believe this is the case in their country, according to the European Commission’s latest Eurobarometer survey. But they have nothing against the common currency, which remains very popular in eurozone countries. Their citizens support their currency at 78%, up from a record high of 80% a year ago.