Dollar’s Decline Triggers Euro Rally

In a single session, the euro surged by 2.15 % against the dollar, reaching 1.109 dollars, its strongest rise since 2015. This brutal rebound goes beyond the mechanics of exchange rates. It signals a sudden loss of confidence in the American currency. Through this shift, markets seem to be reassessing the balance of power between major currencies, in a context where macroeconomic signals and central bank choices are redrawing the lines of monetary fracture.

The fall of the dollar and the rise of the euro

The euro recorded a spectacular increase of 2.15 % in a single session this Thursday, reaching 1.109 dollars. This surge marks the strongest daily appreciation of the European currency since 2015.

Such performance directly results from the brutal fall of the dollar index, which declined by 2 % over the same period.

George Saravelos, global head of currency strategy at Deutsche Bank, speaks of a “radical regime change in the markets” and even mentions “a widespread loss of confidence in the US dollar.” This slide of the dollar has thus triggered a massive readjustment of positions in the foreign exchange markets.

Here are the key elements that accompanied this dynamic:

• The fall of the dollar index : a drop of 2 %, a sign of the rapid weakening of the US currency ;
• An immediate reaction on the euro : mechanical and spectacular appreciation, illustrating the markets’ responsiveness to a monetary imbalance ;
• The analysts’ diagnosis : Deutsche Bank speaks of loss of confidence and signals a deep malaise surrounding the stability of the greenback ;
• A tense macroeconomic context : persistent inflation, doubts about the Fed’s policy, and investors’ shifts looking for more stable havens.

This market sequence reveals a shift in perception : the dollar, long seen as an unchallenged safe haven asset, sees its supremacy questioned in favor of a Europe considered momentarily more resilient.

The Fed’s positioning scrutinized closely

The evolution of the euro is not just a simple pendulum effect against the weakness of the dollar. It also reflects an anticipated re-evaluation of upcoming monetary policies.

That’s why Erik Nelson, macro strategist at Wells Fargo, believes that the future direction of the greenback will depend directly on the course chosen by the Federal Reserve.

“If the Fed prioritizes economic growth at the expense of the fight against inflation, then the dollar could continue to weaken,” he analyzes. These comments shed light on the tensions within American economic policies, torn between two contradictory imperatives.

The foreign exchange market seems today to be guided by this strategic uncertainty. A flexible Fed could amplify downward pressure on the dollar, especially if the European Central Bank maintains a more restrictive policy.

In this case, the interest rate differential would favor the euro, further accentuating the gap observed this week. This monetary rebalancing is not trivial, as it could redefine international capital flows and reposition the euro as a safe haven in the medium term.

The future will largely depend on the signals sent by monetary authorities in the coming days. A confirmed shift by the Fed towards supporting growth could strengthen the current trend, with cascading effects on bond markets, commodities, and cryptos sensitive to real rates. Conversely, a renewed firmness against inflation could temporarily stabilize the markets, without erasing the structural doubts that now weigh on the dollar.