Dollar’s Decline Triggers Euro Rally

In a single session, the euro soared by 2.15 % against the dollar, reaching 1.109 dollars, its highest increase since 2015. This sudden surge surpasses 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 decisions are redrawing the lines of monetary fracture.

The Fall of the Dollar and the Surge of the Euro

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

Such performance is directly derived from the brutal drop of the dollar index, which fell by 2 % over the same period.

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

Here are the key elements that accompanied this dynamic:

• The drop in the dollar index : a decrease of 2 %, a sign of a rapid weakening of the American currency ;
• An immediate reaction on the euro : mechanical and spectacular appreciation, illustrating the markets’ responsiveness to a monetary imbalance ;
• The diagnosis of analysts : Deutsche Bank speaks of loss of confidence and indicates a deep discomfort surrounding the stability of the greenback ;
• A tense macroeconomic context : persistent inflation, doubts about Fed policy, and investor arbitrages seeking more stable havens.

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

The Fed’s Positioning Under Close Scrutiny

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

This is 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 fighting inflation, then the dollar could continue to weaken,” he analyzes. These remarks highlight the tensions within U.S. economic policies, torn between two contradictory imperatives.

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

In this case, the rate differential would work in favor of the euro, further increasing the gap observed this week. This monetary rebalancing is significant, 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 of the Fed towards supporting growth could reinforce the current trend, with cascading effects on bond markets, commodities, and rates-sensitive cryptocurrencies. Conversely, renewed firmness against inflation could temporarily stabilize the markets, without eliminating the structural doubts now weighing on the dollar.