On January 28, 2026, the euro crossed a line that currency traders had been watching for months. It reached $1.20, the highest level in half a year. This number might seem random, but it holds special meaning in currency markets. Traders pay close attention to round numbers like this because they shape how everyone thinks about money’s value.
Round numbers like $1.20 aren’t arbitrary—they act as psychological anchors that shape how traders perceive currency value.
The euro has been on quite a journey. Just a year ago, it nearly dropped to $1, making European vacations incredibly expensive for Americans. Since then, it has surged 13 percent, marking its best year since 2017. The currency has climbed back above its long-term average of just over $1.20, which it has held since its creation in 1999. That is impressive, though still far from its 2008 peak of $1.60.
Several forces are pushing the euro higher. Germany and other European countries have announced new spending plans that excite investors. Meanwhile, the dollar faces headwinds. President Trump’s confrontations on trade issues and criticism of the Federal Reserve have weakened confidence. His comments about Greenland and disputes with allies have not helped either. Speculation about joint US-Japanese intervention to stem yen weakness pushed the dollar down broadly. The dollar still dominates global reserves with 60 percent compared to the euro’s 20 percent, but this gap could narrow.
European Central Bank Vice President Luis de Guindos called $1.20 a “pain threshold” for Europe. A stronger euro makes European products more expensive abroad, which businesses dislike. It also pushes import prices down, making it harder for the ECB to reach its 2 percent inflation target. Officials expect to miss this goal for the next two years. Higher exchange rates can also affect monetary policy by influencing inflation and interest-rate decisions, underscoring the role of the interest rate channel.
After hitting $1.20, the euro has pulled back slightly to around $1.1867. Markets rarely move in straight lines. The path since September has been rocky, with advances and retreats along the way. Last week alone, the euro jumped 2 percent against the dollar, its biggest weekly gain since April. The euro’s six-month average stands at 1.1688 against the dollar, showing sustained strength below the January peak.
This milestone matters because it challenges dollar dominance and reshapes global trade relationships. Whether the euro holds above $1.20 will depend on European economic strength and American political decisions in coming months.
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