Despite the euro zone having lower official interest rates and a notably softer economy than the US, the euro has held up remarkably well against the dollar. The foreign exchange market’s most popular currency pair trades not just in line its $1.085 average of the past year but within reach of the $1.11 five-year mean. The common currency, however, can’t defy gravity forever — so a return toward parity with the greenback looks more likely than not over the course of this year.

At about 6.6%, the exchange rate’s volatility is the lowest it’s been since November 2021, having fallen from nearly 11% a year ago and illustrating how becalmed the market has become. This peaceful state may prove transient; given that rate-cutting cycles and recessions tend to hit the weaker side hardest, the euro looks increasingly vulnerable.