Global Forex Monitor - Summer 2025

The dollar continued its correction throughout June (with a depreciation of more than 12% since YTD), a decline fueled by persistent economic, trade, fiscal, and monetary uncertainties. From a macro perspective, there is already a weakening of household consumption, while businesses remain cautious before the end of the suspension period for reciprocal tariffs on July 9. Despite the slowdown in American growth, the Fed remains cautious about inflationary risks, which has intensified the political pressure exerted by D. Trump on J. Powell. In addition to these cyclical factors, the dollar is also penalized by structural factors that contribute to the correction of its overvaluation, such as twin deficits that could become more difficult to finance in the future. The adoption of the "Big Beautiful Bill" budget proposal could thus raise non-residents' mistrust of U.S. debt, a factor likely to weigh on the dollar.In this environment, we remain bearish on the dollar this summer, although the dollar's correction will be less pronounced than in the first half of the year. The DXY dollar index could test the level of 95.2 if upcoming macro indicators, including the employment report, turn out weaker, and especially if consumer prices do not show any inflationary pressures. Conversely, a renewed spike in tensions in the Middle East could limit the dollar's depreciation.In June, the EUR recorded a 3.3% increase against the dollar (and more than 13% since YTD), reaching a peak not seen since 2021 at 1.182 in early July. This appreciation is primarily due to the weakness of the dollar, resulting from economic uncertainties in the United States and political pressures on the Fed. Meanwhile, the European economy is showing signs of stabilization, supported by European defense and infrastructure support plans in Germany. With the ECB's rate-cutting cycle nearly finished and the Fed barely engaged in its monetary normalization, the EUR/USD could appreciate towards 1.20 in the short term, and a level of 1.22 cannot be ruled out in the medium term.