Above: File image of Christine Lagarde. Photographer: Denis LOMME. Copyright: © European Union - Source: EP.
“They are still miles away from pulling this off... but they do have a chance over the next 10 years."
The euro has a real chance to challenge the U.S. dollar’s dominant role in global reserves over the next decade if the European Union can overcome deep-rooted structural hurdles, according to a research note from Jefferies Bank LLC.
The analysis follows renewed calls from European Central Bank President Christine Lagarde, who in a Financial Times op-ed said "this is Europe’s ‘global euro’ moment."
Lagarde has consistently argued that the euro should seize the opportunity to gain market share in global reserves, positioning itself as a viable alternative to the dollar.
"We are witnessing a profound shift in the global order: open markets and multilateral rules are fracturing, and even the dominant role of the US dollar, the cornerstone of the system, is no longer certain," writes Lagarde.
Jefferies says that while Lagarde is the euro’s "biggest champion," she also recognises the significant work still needed.
"Europe must strengthen three foundational pillars: geopolitical credibility, economic resilience, and legal and institutional integrity," says Lagarde.
Jefferies explains that Europe lacks the depth and liquidity in fixed income markets that underpin the dollar’s global status.
Image source: IMF.
Regulatory fragmentation, unresolved energy vulnerabilities, and institutional inefficiencies will also continue to weigh on the euro’s ability to achieve a reserve status that mirrors that of the U.S.
"Lagarde is correct to say that eurozone cohesion, including removing national vetoes and deepening capital markets, is essential if the euro is to meaningfully rival the dollar," the Jefferies note says.
Currently, the euro accounts for around 20% of global reserves, compared to the dollar’s near-50%.
A reserve currency status is highly coveted because it brings significant economic, financial, and geopolitical advantages.
Countries with reserve currencies (like the U.S. with the dollar) can borrow more cheaply. Since global demand for the reserve currency is high - being used in trade, finance, and held by central banks - investors are willing to accept lower yields on government debt.
U.S. President Donald Trump's policies have significantly dented the appeal of the Dollar. Image source: White House Press Office.
Despite these challenges, Jefferies sees a window of opportunity for the Eurozone:
"The U.S. is basically giving it to them if they feel compelled to take it," the note adds, pointing to political gridlock and fiscal concerns in the U.S. that could accelerate global diversification away from the greenback.
For now, the path remains long and uncertain. “They are still miles away from pulling this off," Jefferies cautions, "but they do have a chance over the next 10 years to move in that direction.”
Lagarde’s push for fiscal union, regulatory reform, and capital markets integration has made her the key figure driving the euro’s global ambitions.
But Jefferies warns that without stronger political will across EU capitals, the vision may remain out of reach: "She is the right champion, but without EU governments pushing aggressively, this will remain pie in the sky."