Rates Spark: Eurozone pushing for global euro, but not overnight

The global role of the euro is back in focus, but mostly as a long-term play – yet the positive momentum could already benefit European debt. Over the weekend, the European Central Bank announced an expansion of its repo lines to the global central bank community, which clearly signals the ECB’s push to strengthen the euro’s position. In theory, this could boost the demand for eurozone government bonds (EGBs), but we are aware that much more needs to be done to challenge the dollar’s dominance.

A key reason for foreign central banks to hold US Treasury bonds as opposed to EGBs is linked to trade activity, something that won’t change overnight. FX reserves mostly reflect the composition of a country’s trade, and dollars are still simply the most widely used trade currency. US President Donald Trump’s protectionist measures could reduce the role of the dollar in trade, but this is not something that will happen overnight – rather as more of a slow trend.

One could also have a more positive take and argue that the eurozone’s conscious efforts to boost the euro’s role can already translate into higher demand for EGBs in the near term. We see that EGB spreads are hitting new lows, suggesting healthy demand overall. In a deep-dive previously, we identified foreign buyers as playing an important role in absorbing the record amount of government supply hitting markets in 2026.

Many other major bond markets are facing their own challenges (think of the US and Japan), and the eurozone is therefore growing more attractive as a safe haven in a relative sense. Having said that, the eurozone will first need to figure out whether the role of a global reserve currency would be fully supported internally. On Monday, for instance, the French government called for an assessment of the negative consequences of a stronger euro.