Latest news with #HertieSchool
CNBC
19 hours ago
- Business
- CNBC
Could the euro pose a threat to King Dollar?
U.S. President Donald Trump's tariffs regime has sparked volatility in American assets — and European officials are making no secret of wanting the euro to seize upon wavering confidence in the U.S. dollar. The dollar is the world's most commonly held reserve currency, accounting for almost 60% of global foreign exchange reserves and playing an important role in the trade of assets like oil and gold. It also acts as a peg for currencies including the Hong Kong dollar and the Saudi Riyal. In second place, trailing far behind the greenback, is the euro, which makes up around 20% of international FX reserves. The dollar index — which measures the greenback against a basket of major rivals — has fallen by more than 8% since the beginning of the year. This week, European Central Bank President Christine Lagarde said the shifting geopolitical landscape that was driving those moves gave European policymakers an opportunity to raise the euro's status. "Multilateral cooperation is being replaced by zero-sum thinking and bilateral power plays," she said on Monday in a speech at Hertie School in Berlin. "There is even uncertainty about the cornerstone of the system: the dominant role of the US dollar." This, she said, could "open the door for the euro to play a greater international role."Closing that gap was "far from guaranteed," Lagarde noted in her speech, while nevertheless suggesting that the European currency could "earn" greater global influence with the right policy mix. "First, Europe must ensure it has a solid and credible geopolitical foundation by maintaining a steadfast commitment to open trade and underpinning it with security capabilities," she said. "Second, we must reinforce our economic foundation to make Europe a top destination for global capital, enabled by deeper and more liquid capital markets. Third, we must bolster our legal foundation by defending the rule of law — and by uniting politically so that we can resist external pressures." A euro with a raised reserve currency status would bring a plethora of benefits to Europe, Lagarde added, including lower borrowing costs for regional governments, insulation from exchange rate volatility and protections for Europe from sanctions "or other coercive measures." "In short, it would allow Europe to better control its own destiny," Lagarde added. She isn't the only ECB official touting the possibilities for the euro, as confidence in the U.S. wavers. Last week, Isabel Schnabel, a member of the central bank's Executive Board, said the euro area could become a safe haven as Trump's tariffs policies take hold — giving the region "a historical opportunity to foster the international role of the euro." Market watchers who spoke to CNBC were divided on the euro's potential to seize some of the dollar's share of global FX holdings. Appearing on CNBC's "Europe Early Edition" on Friday, George Buckley, chief European economist at Nomura, said he could see upside ahead for the euro, as investors looked to diversify away from the greenback. Asked whether he agreed with Lagarde's assessment of the currency's potential, Buckley responded: "Certainly to some extent." "The dollar still is the biggest reserve currency in the world … the euro is still a distant second, but it's gaining in momentum quite significantly with all the things going on in the U.S.," he said. "I think, for sure there is going to be a lot more interest." Buckley said he was seeing suggestions that, in the current environment, investors might want to allocate their funds to assets other than the dollar. "If they're thinking of switching out of the dollar, the euro is an obvious choice," he told CNBC. "It's a huge trading bloc, and clearly the euro is benefiting from this. We think that the euro could be rising to around about $1.20 by the end of the year." The euro was trading at around $1.13 on Friday morning. Since the beginning of the year, the currency has gained more than 9% against the U.S. dollar — a move to $1.20 would mark an additional jump of around 6% from current Buckley was optimistic about the outlook for the euro, Aaron Hill, chief market analyst at FP Markets, told CNBC that the dollar's dominance "remains formidable." "The euro, while backed by the European Union's substantial economic weight, faces significant hurdles," he said. "Political fragmentation across member states and reliance on U.S. security frameworks limit its global influence." Hill added that the euro's limitations were unlikely to evaporate any time soon. "While rising U.S. debt and shifting global alliances warrant scrutiny, the euro lacks the cohesion and reach to challenge the dollar's supremacy in the near term," he told CNBC. "For now, the greenback's reign endures, unshaken." On Tuesday, John Plassard, senior investment specialist at Mirabaud Group, had told CNBC's "Europe Early Edition" that, with the U.S. dollar still accounting for almost 60% of global foreign exchange reserves, there was "no competition for the U.S. dollar" right now.
Eyewitness News
2 days ago
- Business
- Eyewitness News
ECB's Lagarde pitches euro alternative to dollar in 'fracturing' world
BERLIN - European Central Bank President Christine Lagarde on Monday said the global economic order backed by the US dollar was "fracturing" and made a pitch for the euro as a global reserve currency. "The global economy thrived on a foundation of openness and multilateralism underpinned by US leadership," Lagarde said in a speech at the Hertie School in Berlin. Washington's support for a rules-based international system and the dollar as a reserve currency had "set the stage for trade to flourish and finance to expand". The persistence of that US-led economic order over the past 80 years had "proved immensely beneficial to the European Union". "But today it is fracturing," she said in an apparent reference to global trade tensions fuelled by US President Donald Trump's threat to impose sweeping tariffs on key partners. "Multilateral cooperation is being replaced by zero-sum thinking and bilateral power plays. Openness is giving way to protectionism." The recent upheaval was also threatening "the dominant role of the US dollar", she said. The disintegration of the global economic order would "pose risks for Europe", Lagarde said. "Any change in the international order that leads to lower world trade or fragmentation into economic blocs will be detrimental to our economy," she said. But the retreat of the US dollar could also "open the door for the euro to play a greater international role". Increasing the international role of the euro would lower borrowing costs for EU member states, insulate the bloc from exchange rate fluctuations and would "allow Europe to better control its own destiny", Lagarde said. For that to happen, the European Union would need a "steadfast commitment to open trade" and to underpin its position with sufficient security capabilities. It would also need to strengthen its economy and defend the rule of law, she said. "This is not a privilege that will simply be given to us. We have to earn it."
Daily Tribune
3 days ago
- Business
- Daily Tribune
ECB's Lagarde pitches euro alternative to dollar in ‘fracturing' world
European Central Bank President Christine Lagarde yesterday said the global economic order backed by the US dollar was 'fracturing' and made a pitch for the euro as a global reserve currency. 'The global economy thrived on a foundation of openness and multilateralism underpinned by US leadership,' Lagarde said in a speech at the Hertie School in Berlin. Washington's support for a rules-based international system and the dollar as a reserve currency had 'set the stage for trade to flourish and finance to expand'. The persistence of that US-led economic order over the past 80 years had 'proved immensely beneficial to the European Union'.' But today it is fracturing,' she said in an apparent reference to global trade tensions fuelled by US President Donald Trump's threat to impose sweeping tariffs on key partners.
Morocco World
4 days ago
- Business
- Morocco World
EU Central Bank Pushes to Replace US Dollar with Euro as World's Main Currency
Rabat – European Central Bank President Christine Lagarde warned on Monday that the global economic system, which has long relied on American leadership and the US dollar, is starting to break apart. She said this shift could bring risks for Europe, but also new opportunities for the euro, pushing for the latter to become the world's main currency. Speaking at the Hertie School in Berlin, Lagarde said, 'The global economy thrived on a foundation of openness and multilateralism underpinned by US leadership.' She explained that the US dollar has been the main global currency for decades, as it helped trade and finance grow around the world. Europe, she added, benefited greatly from this system. However, Lagarde believes this order is now 'fracturing.' She pointed to growing tensions in global trade, especially actions by US President Donald Trump, who has threatened heavy tariffs on several countries, including the European Union. 'Multilateral cooperation is being replaced by zero-sum thinking and bilateral power plays. 'Openness is giving way to protectionism,' she said. Lagarde warned that if this trend continues, it could hurt the global economy and affect Europe's own growth. 'Any change in the international order that leads to lower world trade or fragmentation into economic blocs will be detrimental to our economy,' she said. Still, she noted that the weakening role of the US dollar could open the door for the euro to become a stronger global currency. A stronger euro, she said, would help EU countries by lowering borrowing costs, reducing the impact of currency swings, and giving Europe more control over its economic future. But this won't happen automatically. 'This is not a privilege that will simply be given to us. We have to earn it,' Lagarde said. She said that the EU must stay committed to open trade, strengthen its economy, defend the rule of law, and invest in its own security. Her comments come as tensions rise between the US and the EU. Last week, Trump expressed frustration with ongoing trade talks, saying the EU was 'formed for the primary purpose of taking advantage of the United States on trade.' He threatened to impose 50% tariffs on EU goods, a big jump from the current 10%. If enforced, these tariffs would affect many products and further strain relations with America's largest trading partner. Tags: EuroEuropeTrumpUSUSD
Business Recorder
4 days ago
- Business
- Business Recorder
Lagarde pitches euro alternative to dollar in ‘fracturing' world
BERLIN: European Central Bank President Christine Lagarde on Monday said the global economic order backed by the US dollar was 'fracturing' and made a pitch for the euro as a global reserve currency. 'The global economy thrived on a foundation of openness and multilateralism underpinned by US leadership,' Lagarde said in a speech at the Hertie School in Berlin. Washington's support for a rules-based international system and the dollar as a reserve currency had 'set the stage for trade to flourish and finance to expand'. The persistence of that US-led economic order over the past 80 years had 'proved immensely beneficial to the European Union'. 'But today it is fracturing,' she said in an apparent reference to global trade tensions fuelled by US President Donald Trump's threat to impose sweeping tariffs on key partners. 'Multilateral cooperation is being replaced by zero-sum thinking and bilateral power plays. Openness is giving way to protectionism.' The recent upheaval was also threatening 'the dominant role of the US dollar', she said. The disintegration of the global economic order would 'pose risks for Europe', Lagarde said.
