ECB member Pierre Wunsch warned the euro could strengthen if Europe seeks a larger global role, citing Trump’s trade policies as a catalyst. “If we want a greater role for the euro, we might have a further appreciation,” he said, though he noted concerns about a rapid rise amid existing volatility. The euro recently approached $1.60, its highest level in years, raising fears of export harm and economic strain. France urged officials to assess risks as finance ministers debated the currency’s trajectory.

Wunsch emphasized analyzing the euro’s effective exchange rate against global markets, not just the dollar, to gauge true strength. He avoided alarm over recent rallies but acknowledged links between currency status and value. Meanwhile, the ECB’s pause on interest rates since June leaves uncertainty about future hikes. Rising energy prices from the Iran conflict could further complicate inflation control, prompting the question: “What do we do if inflation goes up again?”

While ruling out immediate rate shifts, Wunsch hinted at potential European financing for defense spending, contingent on political consensus. He prioritized consolidating Europe’s defense industry over joint funding but left the door open: “If we can politically find arrangements… why not?” This reflects broader efforts to leverage the euro’s rising profile against U.S. trade dominance.

The debate underscores Europe’s balancing act: boosting the euro’s status without destabilizing its economy. With Trump’s policies fueling trade friction, the ECB faces pressure to position the euro as a viable alternative to the dollar. Yet, as Wunsch cautioned, overreach risks “hurting exporters and the economy,” making measured steps critical for sustainable global influence.