Euro’s global role shows early signs of progress 100 days after Lagarde’s call

ING analysis indicates mixed progress for the euro's international role 100 days after ECB President Lagarde's call for a "global euro." While its share in FX reserves stagnated quarter-on-quarter and SWIFT transactions remained flat, the euro is gaining significant traction in debt markets, evidenced by growing issuance, a 38.7% share in international bond markets by Q1 2025, increased foreign buying of eurozone debt, and over 55% of global AAA-rated debt now euro-denominated. Despite limited political follow-through on institutional and fiscal reforms, early signs suggest increasing investor and issuer interest, though dollar dominance remains a long-term challenge requiring credible economic reforms.

Analysis

An analysis by ING reveals a bifurcated outlook for the euro's international role 100 days after ECB President Lagarde's call for its expansion. While metrics like its share in foreign exchange reserves have stagnated quarter-on-quarter and its proportion of SWIFT transactions remains flat year-to-date, the euro is demonstrating significant strength in global debt markets. As of Q1 2025, the euro commanded a 38.7% share of the international bond market, with its issuer base broadening to include Central/Eastern Europe, Asia, and Latin America. Notably, over 55% of global AAA-rated debt is now euro-denominated, and tight spreads on EU Sovereign, Supranational, and Agency debt indicate robust demand, which was further evidenced by a pickup in foreign buying of eurozone debt and equity in Q2 2025. However, this market-driven momentum is contrasted by a lack of political progress on crucial institutional reforms, including the Capital Markets Union and a deeper fiscal union, which ING identifies as necessary long-term steps to credibly challenge the U.S. dollar's dominance.

Key Decisions for Investors

• Fixed-income investors should consider the growing strength and demand in the euro-denominated debt market, particularly for high-quality sovereign and supranational issues, which benefit from a broadening issuer base and significant foreign inflows.
• For foreign exchange positioning, the stagnation in SWIFT usage and reserve share suggests the 'global euro' theme is not an immediate driver for EUR/USD, and investors should monitor progress on EU trade deals and potential shifts in U.S. protectionism as key catalysts.
• Long-term investors must weigh the positive developments in debt markets against the substantial political risk from stalled institutional reforms, as the lack of progress on a fiscal or capital markets union remains the primary impediment to the euro's ability to challenge dollar dominance.