December has traditionally been the euro’s strongest month, historically gaining an average of 1.6% against the U.S. dollar over the past 24 years.
With 71% of Decembers ending on a positive note for the euro, the currency has often capitalized on U.S. dollar weakness, especially driven by American tax regulations. In the last seven years, the euro has recorded consistent gains every December, a streak unmatched by any other month.
However, the euro’s December rally could falter this year due to mounting political and economic uncertainties on both sides of the Atlantic.
Key contributing factors include potential U.S. tariff announcements, which may discourage American corporations from shifting dollars overseas—a practice that typically weakens the dollar in December. This dynamic echoes 2016, when Donald Trump’s surprise election victory disrupted currency trends, resulting in a 0.67% decline for the euro.
Adding to the euro’s challenges are domestic political issues within the eurozone. Germany faces a fractured political landscape, while France grapples with intensifying labour strikes and social unrest ahead of their respective 2025 elections. These factors could erode investor confidence in the single currency.
Geopolitical concerns, including the ongoing Israel-Hamas conflict, the Russia-Ukraine war, and uncertainties surrounding China’s economic recovery, further complicate the outlook. Such tensions are likely to strengthen the U.S. dollar as a global safe-haven currency, reducing its usual December softness.
While December remains historically favorable for the euro, the interplay of these risks could threaten its status as the “strongest month” of the year.
