Since the start of the year, the dollar has collapsed against the euro and other major currencies. A dynamic that seems far from over. The markets adjust to an uncertain geopolitical context, fueled by the economic decisions of the Trump administration. How far will the tumble down of the greenback go?
In short
- The dollar has lost more than 9 % against the euro since January, a trend that accelerates.
- Donald Trump's aggressive trade policy fosters massive loss of confidence.
- Investors turn away from American assets, amplifying pressure on the currency.
- Several large banks anticipate one euro over $ 1.20 by the end of 2025.
The US dollar losing speed on the markets
The dizzying fall of the dollar finds its roots in the wanderings of the Trump administration. The Organization for Economic Cooperation and Development (OECD) lowered its American growth forecasts on Monday to 1.6% for 2025 Monday, compared to 2.2% before and 2.8% in 2024. This drastic revision directly reflects the impact of customs duties announced by Donald Trump.
“” While new customs duties can further encourage to produce in the United States, the increase in import prices will reduce real consumer income “, explain OECD.
The international organization points to an economic paradox: the customs prices supposed to protect the American economy end up strangling it.
Trump's procrastination on its trade policy creates a major uncertainty. Using customs duties as a diplomatic weapon not only turned on business partners, but also shaken the confidence of international investors. This political instability is reflected in a massive capital flight to safer havens.
Trump's budgetary project, his famous “Big, Beautiful, Bill”, further aggravates the situation. Goldman Sachs warns that this project will result in prolonged budgetary deficits, supplying imbalances in the American runway. An explosive cocktail that undermines the credibility of the dollar.
A dollar weakened for a long time!
Bank of America identifies the central phenomenon: ” In recent weeks, the dominant theme of the market has been reviewed by global investors of their major exhibitions in the dollar ». This massive “portfolio rotation” sees capital fleeing American assets to redeploy in Europe.
A market paradox perfectly illustrates this distrust. Since April, US bond rates have climbed 4%to 4.6%, while the dollar fell by 5%. Normally, the increase in rates strengthens a currency. Here, it accelerates the leak of investors.
Deutsche Bank feared in April “a crisis of confidence” on the American motto. Today, the German bank believes that “evil is done”.
Trump threats against Jerome Powell, president of the Fed, added an additional layer of uncertainty. UBS underlines that ” The simple fact of discussing the independence of the Fed has increased extreme risks ».
This crisis of confidence goes beyond the economic framework. It reflects a profound questioning of American hegemony. Investors anticipate a multipolar world where the dollar will no longer be the absolute reference. This anticipation becomes self-fulfilling prophecy.
Towards one euro at $ 1.25?
The forecasts of large banks converge on a sustainable strengthening of the euro. Morgan Stanley table on $ 1.25 by 2026, against 1.14 currently. Deutsche Bank sees the euro at $ 1.20 at the end of 2025, then 1.25 in December 2026. Nomura anticipated $ 1.20 at the end of the year.
This convergence reflects a structural tilting. Europe is moving towards budgetary expansion, with Germany which lifts its brake on debt to increase its defense expenses. At the same time, the euro zone has growth greater than 1%, contrasting with degraded American perspectives.
Bank of America warns that ” Any increase in the short -term dollar will ultimately be considered as an opportunity to sell ». This sentence sums up the state of mind of the market: the dollar is no longer perceived as a refuge value, but as an asset to yield.
Monetary policy accentuates this trend. The Fed hesitates to lower its rates as long as inflation remains high. Conversely, the European Central Bank has larger room for maneuver. This monetary divergence favorable to Europe strengthens the attractiveness of the euro.
At the dawn of a global monetary earthquake
The dollar is no longer what it was. This decline, nourished by poorly calibrated political choices, could turn into a structural trend.
As Voltaire said, ” A paper currency, based on confidence alone in the government which prints it, always ends up returning to its intrinsic value, that is to say zero ». A visionary formula, which today takes on a particular relief.
Dedollarization is no longer a geopolitical fantasy, but a background blade. And no, it is neither the euro nor another Fiat currency that will naturally take over from the dollar – in any case, not a traditional currency.
In this context of growing monetary instability, it might be time to look at the alternative side. Bitcoin, for example, deserves your whole attention. Far from banking dogmas, it could well become a preservation tool in the event of a systemic rupture, now almost inevitable.
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