The Euro is Only Part of the Story
Over the past few months, I have repeatedly pointed out that it makes no sense to look at the USD against the euro. The USD has risen against all other currencies over the past 15 years and now, as expected, it is starting to fall against all other currencies as well.
Of course, some emerging market currencies remain weak against a weak USD. But even here it is clear that most currencies are not extending their weakness, and some are even trending firmer.
It is noticeable that most Asian currencies have been stable against the USD and have depreciated against the Euro.
The USD is the Focus of Attention
The movements of the lead currency determine the movements of all other currencies in relation to each other.
The CHF did not quite stick to my script and strengthened with the euro against the USD, remaining essentially stable against the euro and showing only slight weakness in recent days.
Unsurprisingly, the Pound has weakened slightly against the Euro.
The same is true for the CAD and AUD, although both have fallen much more against the euro, where the correlation forces are stronger.
Only the SEK showed strength against the euro, which does not surprise me much as it has been much weaker than the euro and the other currencies mentioned above in recent years.
So What Will Happen Next?
Trump has already done a lot of damage with his “tariff policy”. Not only with his political “partners” abroad, but more importantly with the population abroad. A third of Canadians, for example, have cancelled their planned holidays in the US. Cancellations are also coming in from Europe. This is causing a recession in the US tourism industry, and the US is losing billions in revenue that would otherwise have helped its trade balance and deficit.
USD Has Depreciated by 12% in 2025
Most of the depreciation took place in April and only came to a halt in the last few days. The USD ended the week 1% higher against the euro. It remains to be seen whether this is the start of a broader correction that could take the USD back to 1.10 EUR/USD, or just a pause before the depreciation resumes.
Personally, I see an Increasing Risk of Further USD Depreciation.
- China shows no interest in negotiations
- How the USD will fare at the end of the 90-day period is still more than uncertain.
- Supplies to the US from Asia and also from Europe have fallen sharply – the build-up of stocks in the US in recent months can bridge the gap for a while, but there will be a problem from the summer onwards.
- American consumers will no longer receive many products => increasing price pressure on remaining supply
- 37% of all shipments from China are processed in the US. If these inputs are lost for an extended period of time, global supply chain issues could dwarf those of three years ago.
