No USD correlation no more

For a long time, the euro exchange rate was seen as one of the main levers for European equities. That link is breaking down. Bloomberg data show that the historically tight correlation between the EUR/USD and the Euro Stoxx 50 has faded and is now close to zero.

This marks a shift. While equities in the eurozone used to rise and fall with the currency, they are increasingly being driven by their own fundamentals: attractive relative valuations, hopes of structural reform, and the prospect of higher infrastructure spending.

Europe remains an interesting market for investors — but we stay cautious, as currency headwinds have not disappeared altogether.