EU leaders are planning for a 750 billion Euro stimulus package to increase the appeal of the Euro-denominated assets and currency. The union agreed to issue debt to provide an excellent alternative to US treasury as a safe place.
The EU’s recovery fund and the euro’s strong connection to equity make the European stocks more lucrative for investors. The recovery fund will offer diversification by providing high-rating and liquid euro debt, out of the greenback, i.e. the US dollar.
Credit Agricole’s Valentin Marinov says that the greenback currency’s world share might touch its lowest since 1990. The euro touched $1.1540 on Tuesday and is 3% already up this year, which is also the shared currencies highest level since January 2019.
However, the path to tackle the dollar’s dominance would not be easy because about 85% of all forex transactions and half invoices of international trade is in US dollars. Meanwhile, the euro only accounted for 20% of forex reserves and was highest in 2009, when it touched the 28% mark.
Nevertheless, the analysts at AG Bisset Associates anticipate a promising future for Euro dominance. They speculate that the shared currency (EUR) might rise as high as 30% in just 16 months. Earlier this month, the EUR/USD touched $1.14, and the experts predict its future to be stronger.
The Euro region could break up the points at some time, and more economic activity will occur in Euros than in US dollar due to recovery fund, giving a good challenge to the US treasury department.