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

Investing.com -- One hundred days after European Central Bank President Christine Lagarde called for a "global euro" moment, the single currency is showing mixed signs of progress in its quest for a more prominent international role.

While acknowledging that this timeframe is too brief to see substantial results, ING’s analysis reveals several indicators worth monitoring as the euro seeks to expand its global footprint.

In foreign exchange reserves, the euro’s share stopped growing quarter-on-quarter as emerging market central banks restocked dollars. However, year-on-year diversification trends remain positive for the euro, with smaller reserve holders emerging as new sources of demand.

The euro’s share in SWIFT transactions has stagnated year-to-date. According to ING analysts, future progress may depend on whether the eurozone can leverage potential US protectionism to enhance its role in global trade. Near-term gains in euro invoicing could come from EU trade deals with India and Switzerland.

Portfolio flows show interesting developments. A Japan case study indicates that shifting trade ties from the US to the EU could increase demand for euro-denominated debt, ING noted. Recent outflows from Japanese investors have stabilized with a slight uptick, suggesting renewed interest in eurozone debt.

In bond markets, euro issuance continues to grow, though still lagging behind the dollar. The euro remains the world’s second-most used currency on international bond markets with a 38.7% share as of the first quarter of 2025. The issuer base has broadened across Central and Eastern Europe, Asia, Latin America, and the Middle East.

Foreign buying of eurozone debt and equity picked up in the second quarter of 2025. These foreign investors play a crucial role in absorbing additional supply from quantitative tightening. EU Sovereign, Supranational and Agency spreads remain tight, suggesting strong demand. More than 55% of global AAA-rated debt is now euro-denominated.

On the regulatory front, the European Commission published plans in June to reform the securitization framework. The ECB will decide in October how to proceed with the digital euro initiative.

Despite these developments, political follow-through on Lagarde’s vision has been limited. Decisions on institutional reforms through Qualified Majority Voting remain distant, as does discussion about closer fiscal union to support consistent supply of safe assets like EU bonds. Discussions on capital markets union have not gained new momentum in European capitals.

While the euro is already well-established in global markets and trade, ING finds early evidence, particularly in debt markets, of issuers and investors warming to the euro project.

However, competing against dollar dominance remains a long-term challenge that will require credible reforms to the monetary union, institutions, and the economy.

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