ECB officials question whether euro has strengthened too much
European Central Bank
(ECB) president
Christine Lagarde
hailed a 'global euro' moment and said the common currency could rival the dollar, some inside the central bank are wondering if the euro's strength could become too much of a good thing.
The euro has soared 14 per cent against the dollar in 2025 to reach its highest level in nearly four years as investors pile into European assets to shelter from US policy volatility, upsetting predictions it would hit parity with the greenback this year.
The rise came despite a mounting divergence in interest rates between the US and the much lower rates in Europe, an upending of the usual market dynamics.
At the ECB's three-day annual conference in Sintra, Portugal, its vice-president Luis de Guindos was most outspoken, telling Bloomberg TV on Tuesday that 'we should try to avoid any sort of overshooting'. While the ECB could look past the current exchange rate of around $1.18, levels beyond $1.20 'would be much more complicated', he said.
READ MORE
A stronger currency makes imports cheaper and drags down inflation, while sales abroad become more expensive and weigh on growth, particularly for export-dependent Europe.
With the euro zone already threatened by a trade war with the US, some central bankers are uneasy. One senior European central banker, speaking on the condition of anonymity, said the ECB might need to signal more strongly that it does not like an overly strong euro, as it increases the risk of inflation undershooting targets.
[
Euro zone inflation rises to ECB's 2% target
Opens in new window
]
A second senior official said the strong euro could 'become an issue'.
Tomasz Wieladek, chief European economist for fixed income at T Rowe Price, said ''policymakers likely expected a slow euro appreciation over time ... but this is not what is happening in practice'.
The rise has been 'too fast for comfort', Mr Wieladek said, adding that it was 'likely because private sector portfolios are also pivoting to Europe and at much larger speed than anticipated'.
If the euro appreciates further to hit $1.25 this year – a rise of 6 per cent from the current level – the ECB could cut rates by half a percentage point to mitigate the effects on inflation and the economy, he said.
How the wealthy are buying up land to avoid inheritance tax
Listen |
22:03
While the ECB has halved borrowing costs to 2 per cent since June 2024, the US Federal Reserve has kept them higher at more than twice that rate. Historically, higher US yields attracted capital inflows into the US, strengthening the dollar.
The stronger euro has helped to make life easier for the ECB as it reduced fears that a potential trade war with the US could drive up inflation in the currency bloc.
Investors were seeking alternatives to the dollar, as this year's news flow could translate 'into a general lack of confidence that will be further fuelled by more uncertainty', Ms Lagarde said in Sintra.
'
There is clearly something that has been broken,' she said about the dollar's weaknesses, adding that it was unclear if 'it is fixable'.
[
US dollar suffers worst start to year since 1973
Opens in new window
]
Ms Lagarde did not address the implications for ECB policy, but stressed: 'We take it into account for purposes of our projections.'
As inflation hit the ECB's medium-term 2 per cent target in June, and is projected to temporarily fall to 1.6 per cent next year, there is increasing unease among Europe's top central bankers – especially if the stronger euro coincides with higher US tariffs.
'A stronger euro would weigh on exports and so can be disinflationary,' said Pooja Kumra, a rates strategist at TD Securities. 'The euro area at this stage really doesn't want to enter the deflation era seen in the 2010s.'
The challenge for the ECB is that any attempts to tamper with the exchange rate could easily backfire. 'There is a long-standing etiquette among global central banks that unilateral action on the exchange rate is off-limits,' one influential policymaker told the Financial Times.
Uncoordinated attempts to tamper with currency markets are either doomed to fail or could even trigger a currency war, they said, adding that the situation was further complicated by some Trump allies arguing in favour of a weaker dollar.
Some investors are sanguine. Mike Riddell, a fund manager at Fidelity International, pointed to the EU's large trade surplus, which is typically an indication that a country's currency should appreciate.
'I don't think policymakers have a leg to stand on when complaining about the euro being strong,' he added.
Boris Vujčić, governor of the Croatian central bank and one of the 26 members of the ECB's governing council, was similarly unfazed. The euro is at the same level as when it was introduced and has traded more strongly in many of the past 25 years, he said. 'Current levels are far from being exceptional.' – Copyright The Financial Times Limited 2025
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Irish Examiner
an hour ago
- Irish Examiner
Support for Ukraine's EU membership quest as Zelensky meets key European backers
Danish Prime Minister Mette Frederiksen has vowed to back Ukraine in its quest to join the European Union, as Denmark officially launched its six-month presidency of the world's biggest trading bloc. Ukrainian President Volodymyr Zelensky joined Ms Frederiksen and European Commission president Ursula von der Leyen in the western city of Aarhus, where Denmark is marking the start of its eighth EU presidency since joining in 1973. It comes after US President Donald Trump's administration decided to halt some arms shipments promised to help Kyiv fight off Russia's invasion. Russia's renewed push to capture more territory has put Ukraine's defences under severe strain, with the war now in its fourth year. Ukraine belongs in the EU. It is in the interest of both Denmark and Europe. Therefore, the Danish presidency will do everything we can to help Ukraine on its path towards EU membership Russian missiles and drones are battering Ukrainian cities, while US-led efforts to find a peace settlement have stalled. 'Ukraine belongs in the EU. It is in the interest of both Denmark and Europe. Therefore, the Danish presidency will do everything we can to help Ukraine on its path towards EU membership,' Ms Frederiksen said in a statement. Ukraine's EU membership path is being blocked by Hungary. Prime Minister Viktor Orban insists that the country should remain a buffer zone between Russia and Nato countries. Increased military support, co-operation with the Ukrainian defence industry and new sanctions against Russia were also due to be discussed between EU officials and Mr Zelensky. Danish Prime Minister Mette Frederiksen and European Commission president Ursula von der Leyen at an event to mark the official opening of Denmark's EU presidency (Liselotte Sabroe/Ritzau Scanpix via AP) 'We must partly strengthen Ukraine, partly weaken Russia. The first thing we do is increase military support. Ukraine is crucial for Europe's security,' Ms Frederiksen said. 'The second thing we do is sanctions. We must increase the pressure on Russia.' Her government has invested in Ukraine's defence industry – which can produce arms and ammunition more quickly and cheaply than elsewhere in Europe – and has invited Ukrainian companies to set up shop on safer ground in Denmark. Mr Zelensky is also scheduled to have an audience with King Frederik X of Denmark.
Irish Times
3 hours ago
- Irish Times
Minding your business and your baby: is being your own boss the answer for working mums?
Women who start their own businesses say freedom, better work-life balance and autonomy are the main reasons they take the plunge into self-employment. Despite its glamorous reputation, entrepreneurship is a high-risk gamble financially, personally, emotionally and physically. The start-up stages are marked by uncertainty; there are long hours, unpredictable income and no guarantee of success. There's also nagging self-doubt as you wonder if anyone will like your idea or spend money on your product or service. Even so, women in Ireland today are more likely to start their own business than in previous generations. Around 29 per cent of Gen Z women (age 18 to 27) called themselves an entrepreneur, according to research from Mastercard earlier this year. Among millennial women (age 28 to 43) this drops to 24 per cent, and just 17 per cent for women in Gen X (aged 44 to 59). Approximately 21,000 people were surveyed within Europe , including 1,000 in Ireland. Unfortunately, barriers still exist for those women hoping to become entrepreneurs. Of those surveyed, 31 per cent of women named a lack of confidence as a reason for not starting their own business, compared with 20 per cent of men. READ MORE Childcare was also identified as a challenge, with 14 per cent of women business owners saying managing childcare arrangements was a barrier to starting their business, compared with just 3 per cent of their male counterparts. [ The motherhood penalty: 'Once they're in bed, you log back on at 9pm or 10pm and work' Opens in new window ] Like children, new businesses require huge amounts of time, focus and funding. So, is it possible to mind your business and the baby? This week we spoke with two successful women who, despite the challenges, have been growing their business along with their families. Skin in the game Consultant dermatologists Caitriona Ryan and Nicola Ralph founded the Institute of Dermatologists in July 2019. At the time, Ralph's child was six; Ryan gave birth to her first child two weeks after they opened and the second 14 months later. Ryan also has five stepchildren. Today, the pair have doubled the size of the original clinic and they have 13 consultant dermatologists and 24 staff. They've also recently launched two additional businesses: ID Formulas, a dermatologist-developed longevity supplement brand, and Surgical Institute Dublin, a specialist centre for skin cancer surgery. They're projecting 40 per cent year-on-year growth over the next three years. Although growth was always part of the plan, Ryan and Ralph self-funded the venture so they don't have any loans from banks, investors or gifts from their parents. The equity is all theirs. They'll be taking out their first bank loan (€2 million) soon to fund the surgical institute. Funding is a big challenge for most entrepreneurs but it's much harder for women to obtain. When women entrepreneurs seek out venture capital funding they receive less than 2 per cent of all investment capital globally. The number of female-led companies funded, and the amounts raised, in the State have not budged by much since 2017. In 2024, women-led start-ups raised €145 million across 48 companies, according to TechIreland. From 2017 to 2023 only 10 additional female-founded companies received investment. The average funding in 2023 was €1.2 million which is the same as 2017. [ Ireland ranks third in Europe for investment in women-led start-ups Opens in new window ] Women also only seem to be taken seriously in certain sectors. The life sciences and the health-tech sector made up nearly 90 per cent of the total funding these start-ups received, a funding pattern that mirrors the overall European trend. Among venture capitalists and investors, there's an erroneous belief that women entrepreneurs lack ambition or the grit to build and scale a successful business. This even shows in the types of questions they ask potential female v male entrepreneurs during pitch presentations. A TechCrunch Disrupt New York study in 2023 found that 67 per cent of the questions asked of male entrepreneurs focused on positive things such as growth plans, monetisation and milestones – for example: 'How do you plan to make money with your business?' In contrast, 66 per cent of the questions for women entrepreneurs were more cautious, even negative. They often concerned risk management and projected time to break even. For example, the 'How long will it take for your business to become profitable?' question attempts to gauge attitude to risk and understanding of financial sustainability instead of focusing on growth and progression. Growing ambition Ralph believes we need to normalise ambition in parents, especially mothers. 'That means backing founders and leaders with families, not in spite of their parenting roles but because of the resilience, focus and empathy those roles foster. In venture capital, that would look like more flexible funding structures, female-led investment teams and a conscious shift away from bias around founder availability or assumptions about commitment.' Ryan says: 'Women shouldn't feel they have to suppress ambition to be good mothers. In fact, ambition can model strength, independence and vision for our children. I think women are often made to feel they must choose between career and family, but we shouldn't have to. With the right support, it's possible to do both meaningfully.' Ryan has a full-time nanny and her stepchildren and partner are very involved too. Ralph's parents have looked after her child from the start so she's rarely had to worry about childcare. Then and now, family life and the business have grown in tandem. 'The flexibility of entrepreneurship means I can be there for Friday pick-ups, the Christmas play and other events when it matters. Yes, it's hard work, but it's work I'm deeply passionate about, and I wouldn't change anything about my life' says Ryan. Ralph says the ability to structure their days has been helpful. 'Some days are completely clinic-focused or spent in theatre, others revolve around our children's needs – but having each other as co-founders and mothers means we understand those shifts without judgment.' The culture in medicine still leans heavily toward the idea that complete personal sacrifice is a badge of honour. I'd push for training environments that promote balance, not burnout — Dr Nicola Ralph Although the dermatological duo have managed to overcome most of the barriers placed in their way, they think a conscious effort needs to be made to make entrepreneurship more easily accessible for parents. Ryan thinks childcare should be tax-deductible or subsidised, as it remains one of the greatest barriers for parents, especially mothers, returning to work. More comprehensive parental leave support for self-employed parents is also essential, as they're often excluded from traditional entitlements, she says. [ Childcare in Ireland: 'Even as well-paid professionals, it was an exhausting struggle. The numbers never added up' Opens in new window ] 'From a government policy perspective I'd start with more accessible, affordable, and high-quality childcare,' says Ralph. 'I've been blessed to have my parents take care of my daughter for the last 12 years but I think access to childcare is the single biggest factor that limits working parents participation and progression. 'Schools could do more to align with modern working life, such as offering longer hours, better after school programmes and more holiday support would ease pressure enormously. Often parents are struggling with camp after camp during the summer months due to lack of childcare. 'The culture in medicine still leans heavily toward the idea that complete personal sacrifice is a badge of honour. I'd push for training environments that promote balance, not burnout, including proper mentorship for doctors who want to combine family life with ambitious careers. Flexibility, job sharing and protected parental leave shouldn't feel like compromises, they should be part of a well-designed system.' Margaret E Ward is chief executive of Clear Eye, a leadership consultancy. margaret@
Irish Times
3 hours ago
- Irish Times
Irish mogul Paul Coulson insists on $300m to walk away from Ardagh
Irish entrepreneur Paul Coulson has told Ardagh bondholders that its shareholders need a payment of at least $300 million (€254 million) to walk away from the debt-laden packaging giant he built through decades of acquisitions. Ardagh Group , which is based in Luxembourg and produces glass bottles and metal cans in facilities spanning Europe, America and Africa, has been at the centre of contentious restructuring negotiations about more than $10 billion of debt built up in the era of cheap money and low interest rates. After Ardagh announced in May that talks had broken down about a restructuring in which Coulson – the group's former chair who has voting control of its shares – would retain a stake, discussions have shifted to whether the Irish entrepreneur and other shareholders would hand over the whole company in exchange for a one-off payment. Coulson has insisted that Ardagh shareholders need $300 million in order to consider walking away, according to people familiar with the discussions, with other strict conditions around securing the money swiftly. READ MORE [ Paul Coulson faces last stand in battle to retain control of Ardagh Opens in new window ] While bondholders earlier offered $250 million to these shareholders, the Irish businessman has already rejected their proposal, according to the people familiar with the matter. Coulson has relayed that the group's shareholders will not accept anything less than $300 million, they added. A tough negotiator with a flair for financial engineering, Coulson's previously lucrative investment in Ardagh rose from the ashes of a troubled airline leasing business in the 1990s. After winning a multimillion payout from a legal settlement with the investment bank that advised him on a disastrous takeover deal by the aviation finance firm, Coulson ploughed the windfall into a stake in Ardagh, which was then a small Dublin-based bottling company. Through a series of debt-fuelled acquisitions, the businessman transformed Ardagh from a regional Irish bottler into one of the world's biggest producers of both glass and metal drinks containers. In the process, Coulson became a billionaire because of the value of his stake, making him one of the richest people in Ireland. Ardagh for decades has been a frequent issuer of junk bonds, serving as a bellwether of the market for riskier debt in Europe. During the height of low interest rates and quantitative easing, Ardagh's parent companies pushed the envelope in issuing risky payment-in-kind bonds that can pay bondholders interest in the form of more debt. Coulson has in the past profited from buying up Ardagh's riskier bonds at a discount during periods of market volatility, riding out jitters around the sustainability of the group's debt with his stake in the business intact. But, in recent years, Ardagh has been hit by interest rate rises, surging costs at its energy-intensive plants and a slowdown in demand at the large drinks manufacturers that are the group's main customers. While Coulson controls more than 50 per cent of Ardagh's voting rights, his economic stake is smaller. All Ardagh shareholders would receive a piece of the $300 million in accordance with the size of their stake under the proposal. Control would then pass to Ardagh's unsecured bondholders, which would also write down part of their debt. The group's riskiest payment-in-kind bonds would be fully written off in exchange for a small minority stake in the business. The unsecured debt is largely held by hedge funds, including London's Arini Capital Management and Los Angeles-based Canyon Partners, which separately filed a lawsuit against Ardagh and Coulson in March alleging that a restructuring could siphon value away from lenders. Ardagh last month filed to dismiss the claim in New York courts on the basis that it contains 'numerous fatal flaws'. Ardagh is split into several different silos and subsidiaries, with its metals packaging division listed on the New York stock exchange. Debt at this listed Ardagh Metals Packaging unit, which has 24 per cent of its shares freely traded and held by other investors, will not be affected by the proposed restructuring. Ardagh and Coulson declined to comment. Copyright The Financial Times Limited 2025
