Dollar confidence wavers; can the euro-dollar exchange rate break through 1.10 and continue to rise?

Since the beginning of this year until April, the euro against the US dollar (EUR/USD) has already increased by a total of 7%, with a single-day surge of 1% to 1.1063 on April 9. Behind this rally, it reflects the market’s reassessment of the US dollar outlook.

US Dollar Hegemony Weakening, Euro Becomes a New Safe Haven

The long-term status of the US dollar as a global safe-haven asset is loosening. The impact of tariff policies on the US economy has led investors to question the safety of the dollar. Meanwhile, the Eurozone is actively strengthening its appeal—enhancing defense investments, implementing loose fiscal policies, and increasing the supply of safe assets. These measures are gradually making the euro a reliable alternative to the dollar.

Deutsche Bank’s latest analysis indicates that if the euro can return to a level that accounts for more than a quarter of foreign exchange reserves since the 2010s, it could drive over 600 billion euros of capital into European assets. Based on the policy directions of the Federal Reserve and the European Central Bank, the driving force behind the dollar’s depreciation is expected to further strengthen over the next year.

Traders Rebet, Institutions Forecast Continued Euro Appreciation

Karen Ward, Chief Market Strategist for EMEA at JPMorgan Asset Management, pointed out that Europe is currently showing “triple stimulus” from currency, fiscal, and regulatory measures, which explains why European assets are performing relatively stronger and the euro continues to rise against the dollar.

Traders have already begun increasing bets on the European Central Bank cutting interest rates, with four more cuts expected in 2025, each by 25 basis points. UBS analysts believe that, influenced by new tariff policies, the US economy will be more affected than the eurozone, and the Federal Reserve’s easing cycle is expected to last longer than the European Central Bank’s, providing fundamental support for euro appreciation.

Multiple Institutions Raise Forecasts, Euro Against USD May Approach 1.12 by Year-End

Goldman Sachs judges that, as the narrative of US exceptionism fades and recession risks rise, foreign exchange hedging strategies are shifting, and the dollar will face sustained depreciation pressure.

UBS has raised its 2025 September target for EUR/USD to 1.12, and further increased it to 1.14 by March 2026, citing that the damage from US tariffs to the domestic economy has exceeded expectations. Nomura Securities also believes that the eurozone will undergo a “structural reorganization,” which will provide long-term support for euro appreciation.

JPMorgan expects that, although trade wars will drag down eurozone GDP growth by 0.5% to 1.5%, this will not be enough to push the eurozone into recession, and the euro’s relative strength is unlikely to be reversed in the short term.