Dollar Plummets 9% Against Euro Amid Trump Policies

The dollar has experienced a significant decline against the euro and other major currencies since the beginning of the year, with a loss of more than 9% against the euro. This trend is accelerating and is expected to continue due to the uncertain geopolitical context and the economic decisions made by the Trump administration. The fall of the dollar is fueled by a massive loss of confidence in American assets, leading investors to turn away from them and increasing pressure on the currency.

The roots of the dollar's decline can be traced back to the missteps of the Trump administration. The Organisation for Economic Co-operation and Development (OECD) lowered its US growth forecasts to 1.6% for 2025, down from 2.2% previously and 2.8% in 2024. This drastic revision reflects the impact of tariffs announced by Donald Trump, which are meant to protect the US economy but end up strangling it. The rise in import prices reduces consumers’ real incomes, and Trump’s hesitation on his trade policy creates major uncertainty, shaking international investor confidence and resulting in a massive flight of capital to safer havens.

Trump’s budget plan further worsens the situation, with Goldman Sachs warning that this plan will result in prolonged budget deficits, fueling imbalances in the US current account. This explosive cocktail undermines the dollar’s credibility. Bank of America identifies the central phenomenon as global investors reassessing their significant exposures to the dollar, leading to a massive “portfolio rotation” where capital flees American assets to redeploy in Europe. This distrust is illustrated by the fact that since April, US bond yields rose from 4% to 4.6%, while the dollar fell 5%. Normally, rising rates strengthen a currency, but here they accelerate investor flight.

Deutsche Bank feared in April “a crisis of confidence” in the US currency. Today, the German bank believes “the damage is done.” Trump’s threats against Jerome Powell, Fed Chair, added another layer of uncertainty. This confidence crisis goes beyond the economic sphere and reflects a profound questioning of American hegemony. Investors anticipate a multipolar world where the dollar will no longer be the absolute reference, and this anticipation is becoming a self-fulfilling prophecy.

Major banks’ forecasts converge towards a lasting strengthening of the euro. Morgan Stanley forecasts 1.25 dollars by 2026, up from 1.14 currently. Deutsche Bank sees the euro at 1.20 dollars at the end of 2025, then 1.25 in December 2026. Nomura anticipates 1.20 dollars by the end of this year. This convergence reflects a structural shift, with Europe moving towards budget expansion and the eurozone showing growth above 1%, contrasting with the deteriorated US outlook. Bank of America warns that “any short-term dollar increase will ultimately be seen as a selling opportunity,” summing up the market sentiment that the dollar is no longer viewed as a safe haven but as an asset to be sold.

Monetary policy intensifies this trend. The Fed hesitates to cut rates as long as inflation remains high, while the European Central Bank has more room to maneuver. This monetary divergence favoring Europe enhances the euro’s attractiveness. The dollar is no longer what it used to be, and this decline, fueled by poorly calibrated political choices, could turn into a structural trend. Dedollarization is no longer a geopolitical fantasy but a tidal wave, and it might be time to consider alternatives such as Bitcoin, which could become a preservation tool in case of a systemic rupture, now almost inevitable.