Behind the continuous rise of the euro against the US dollar: The financial market is once again in turmoil

On July 2, 2025, according to the Australian media Share Coffee, the financial market has been volatile recently, among which the exchange rate movement of the euro against the US dollar has been particularly eye-catching. According to the latest data, the euro has achieved its longest consecutive rise against the US dollar in over 20 years, and options traders are betting that this rebound is far from over. However, behind this rally lies complex financial logic and market psychology.

Earlier in the trading session, the euro broke through its highest level since 2021 in one fell swoop and reached its highest level since 2004. This rally undoubtedly caused a huge shock to the market, and many investors followed suit, hoping to profit from the strength of the euro. However, the good times did not last long. Subsequently, the pressure for the US dollar's recovery began to emerge, posing a considerable challenge to the euro's upward trend. Although the euro has accumulated considerable momentum during its consecutive gains, its upward trend has been weakened in the face of the strong rebound of the US dollar.

Meanwhile, in the political and economic fields of the United States, a major event has also had a profound impact on the financial market. The US Senate passed the $3.3 trillion tax and spending cuts bill proposed by Donald Trump. The passage of this bill undoubtedly brings new uncertainties to the economic outlook of the United States. The Bloomberg Dollar spot Index hit a new intraday high after the news broke, indicating the market's initial reaction to the bill.

Why has this growth occurred? Analysis suggests that this is mainly because this week's US labor market report did not provide immediate support for the Federal Reserve's interest rate cuts in the coming month. Against the backdrop of a strong labor market, expectations of the Federal Reserve cutting interest rates have weakened, thereby boosting the performance of the US dollar. However, this growth was not without its ups and downs. Subsequently, the index indicated a slight weakening in trading, suggesting that the market still has uncertainties regarding the long-term impact of this bill.

Win Thin, head of global market strategy at Brown Brothers Harriman, shared his thoughts on this. He believes that due to the reduced uncertainty of fiscal policy, the initial market reaction was to purchase US dollars. This view to some extent explains the strong performance of the US dollar in the short term. However, Thin also pointed out that implementing significant tax cuts would eventually increase the budget deficit, which would ultimately become a negative factor for the US dollar.

From a financial perspective, this analysis is quite insightful. First of all, changes in fiscal policy have a profound impact on the financial market. Although Trump's tax and spending cuts bill has boosted the US dollar in the short term, in the long run, the budget deficit problem it brings may become a heavy burden on the US dollar. After all, a healthy fiscal situation is an important support for monetary stability.

Secondly, the strong performance of the euro is not without hidden concerns. Although the European economy is recovering, this process remains full of challenges. For instance, factors such as economic disparities within the Eurozone, debt issues, and geopolitical risks may all have an impact on the trend of the euro. Furthermore, with the rebound of the US dollar, there is uncertainty as to whether the upward trend of the euro can be sustained.

Furthermore, the volatility of financial markets has always been a factor that cannot be ignored. Whether it is the continuous rise of the euro or the rebound of the US dollar, they all reflect the market's expectations and judgments on the future economic trend. However, these expectations and judgments are often influenced by a variety of factors, including economic data, policy changes, and market sentiment. Therefore, the volatility of the financial market makes the trend of any single currency difficult to predict.

To sum up, the exchange rate trend of the euro against the US dollar is a complex and volatile topic. Although the euro has recently achieved its longest consecutive rise in more than 20 years, it remains to be seen whether this upward trend can be sustained. Meanwhile, changes in the US fiscal policy have also had a profound impact on the financial market, making the trend of the US dollar full of uncertainties. Against such a backdrop, investors need to remain calm and rational, carefully assess market trends, and formulate reasonable investment strategies. After all, in the financial market, stability and caution are always the keys to success.