(BFM Stock Exchange) – Suffering since the start of the year, King Dollar is still in the field to drop against the Euro zone currency. The impact of customs duties, the weakness of the US job market and future Fed rate drops are good to put more pressure on pressure.

A little over a year ago, a number of design offices provided for a 2025 vintage radiating for the dollar in the face of other currencies. Some strategists believed that the greenback could get closer to parity against the euro (that is to say a dollar for a euro) and even go beyond.

So far, nothing has been. Since the beginning of the year, the Doxy index, which has been measuring the performance of the dollar in the face of a basket of international currencies, falls 9.9%

a movement pronounced on the exchange market. Faced with the euro, the dollar has lost even 11.5% since January 1. Currently, the euro is exchanged around 1.17 dollars and even exceeded 1.18 dollars in early July.

We have detailed the reasons for the decline of King Dollar several times. Concretely, Donald Trump’s economic policy, in particular that on customs duties, has caused significant uncertainty and disaffection of investors for American assets, such as obligations and actions. Market operators have therefore modified their portfolios, by buying titles from other geographic areas. Especially in the euro zone, where the measures taken by certain countries to strengthen growth and military spending, Germany in the lead, have attracted investors.

Concretely, these market movements are to sell dollar to buy Euro (or other currencies), which has sealed the American currency.

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Threat of independence on the side of the Fed

Degraded growth prospects in the United States (the OECD only expects 1.6% this year after 2.8% in 2024) and Trump administration pressure on the American Federal Reserve (Fed), abused the Central Bank independence, increased pressure on the greenback.

Any growth creates a more favorable environment for dropping rate drops, and by ricochet to a decrease in the country’s currency in question (lower rates pay less savings, attracting less foreign capital).

The questioning of the independence of the Fed is a factor that should not be underestimated. A central bank under the orders of the executive of a country risks making decisions related to a political agenda, by maintaining, for example, low “artificially” rates.

A study of the IMF relating to several dozen central banks over the period between 2007 and 2021 shows that those with a high level of independence have better succeeded in mastering the inflation anticipations of their population, which helps to contain inflation at a low level.

Trump wants a weak dollar

Besides, Donald Trump has continued to demand the Fed rate drops, multiplying the jibes towards its president, Jerome Powell. The American president did not hide, either, that he preferred to have a lower dollar to “earn a lot of money” by selling “trucks” or “tractors”.

The White House tenant could see his wish, because several banks and design offices recently published notes stressing that the greenback was likely to continue its fall in the face of other currencies, the euro in particular, in the coming months.

On the other hand, the explanations exposed by strategists will probably not delight Donald Trump, who wants both low rates, a low dollar but also a vigorous economy with strong job creations.

Last week, UBS reviewed its projections for Eurodollar, tabling on one euro at $ 1.21 at the end of December, then $ 1.22 at the end of March 2026 and $ 1.23 at the end of June 2026. The Swiss bank talks about monetary and economic differences to justify its projections.

On the one hand, in the euro zone, the European Central Bank (ECB) is close to having completed its cycle of drops in guiding rates, and measures to revive governments, especially Germany, will begin to infuse in the economy in the coming quarters. This will allow the old continent to reduce the growth gap with the United States.

“The euro continues to benefit from stronger growth, a less marked monetary softening to come and its role as an alternative by default for global investors seeking to diversify their investments outside the dollar. In addition, recent trade agreements have reduced uncertainty for European companies,” she explains. The United States and the European Union agreed at the end of July on a trade agreement which brings American customs duties back to the majority of Europe imported to 15%.

On the other hand, the United States has delivered disappointing economic activity data, in particular at the level of job creations. Recall that full employment is one of the two objectives of the Fed’s mandate, alongside price stability.

The final line of defense of the “capitula” dollar

Consequently, UBS expects, like the entire market, that the Fed reduces its rates from its September meeting, before then lowering them to each of its other meetings of 2025.

“American growth and the recovery of Fed rate drops should continue to drop down the dollar in the coming dollars,” said UBS. “With the attenuation of trade tensions and refocusing on domestic policy with a view to the mid-term elections of 2026, the dollar should stabilize in mid-2026,” she predicts.

A little more than a week ago, ING held a similar observation, the Dutch bank seeing the euro reaching $ 1.20 at the end of 2025. However, the establishment thinks that the rise in the Euro -facing currency against the greenback will continue for a long time, since it anticipates a Eurodollar at 1.22 at the end of 2026 then 1.25 at the end of 2026.

ING explains that the last “defense line” of the greenback was the vigor of the job market. But this factor “started to capitulate” with the latest employment report. Ultra-December, this document mainly contained significant downward revisions (258,000) on post creations in May and June.

“The deterioration of the labor market is notable, consumer confidence being even lower than the official data suggests,” points out the Dutch bank. For this reason, ING considers that the Fed will drop its 25 basis rates (0.25 percentage points) in September, October and December, with 50 additional base points in 2026.

On the other hand, the bank believes that investors still have appetite for the assets of the euro zone.

“It seems that international investors are always interested in the theme of the rotation of assets, and the euro zone remains sought. The data of the balance of payments of the European central bank show a sustained and continuous interest for the debt and share products of the euro zone in May and June, foreigners having bought for a total of 236 billion euros of assets of the euro zone during this period of two months.”

Towards a return in force from Germany

ING also sees a return to relatively high growth in Germany, which would constitute a powerful engine for the euro against the dollar.

“By 2026, our basic point of view is that a German expansion focused on budgetary measures to growth rates of 2% will be a source of continuous gains for Eurodollar throughout the year. Growth of 2% in Germany is much more than 2% growth in the United States in terms of impact for Eurodollar,” she explains. This even brought him to count on an increase in BCE rates at the beginning of 2027, “long before” the Fed.

Same bell sound on the side of Bank of America’s strategists, who advise investors to target a Eurodollar at 1.20 in the coming months.

“We are downgraded on the dollar and anticipate an additional withdrawal potential in the second half,” they warn. Bank of America’s strategists believe that the latest employment report but also the latest ISM Services, an activity indicator of the private sector, “revive fears of stagflation, a phenomenon that we consider negative for the dollar”.

For its part, Deutsche Bank published this week a very detailed note on the reasons explaining why the dollar has to drop again.

“The macroeconomic news in recent weeks remains down to the dollar. The United States is undergoing a combined negative demand for demand (customs rights) and supply (immigration), the independence of the Fed being potentially compromised simultaneously. The impact of all this on inflation is uncertain,” details the establishment. “On the other hand, it is clear that growth should be lower, the real rates lower and, by extension, the dollar too,” she asserts.

Customs duties will rise in power

The bank is also surprised that the recent news illustrating the pressures of the American executive on the Fed (with in particular Trump’s desire to dismiss the Governor Lisa Cook) does not worry the market any more.

“We do not find any convincing argument to explain why the market should not incorporate this risk into its prices further,” she explains.

Regarding growth, “the tender” on employment caused by American anti-immigration policies will weigh on activity. As well as customs duties.

“After all the trade agreements concluded this summer, we have a clearer vision of the area of ​​impact of American customs duties. Does this mean that the macroeconomic and commercial impact has passed? We doubt it,” said Deutsche Bank.

According to data and bank calculations, American customs take approximately 10% per dollar of imports today. But according to its estimates, this rate should be more between 15% and 20%.

“The small current performance of customs duties can, in our view, be mainly attributed to a combination of transhipment effects – notably for China – and a high concentration at the start of the period of imports of pharmaceutical and electronic products, currently exempt from customs duties”, explains the establishment. The bank believes that these factors will gradually fade, and the rate should thus be closer to the 15% to 20% it evokes.

“To place this in a budgetary context, an increase of 15% in the customs right rate made over $ 3,000 billion in imports is equivalent to a tax of $ 450 billion and a budgetary tightening of 1.5 points of GDP,” explains Deutsche Bank. However, this cost will above all be borne by American players (and consumers), hence the shock on the request mentioned by the establishment.

Goldman Sachs explained, on the latter point, in early August, that at present the cost of customs surcharge was mainly absorbed by American companies, up to 64%, against 14% for exporting companies and 22% for the American consumer. But in the coming months, US groups will return to these costs, according to a note from the bank quoted by Bloomberg. Ultimately, 67% of these costs will be collected by American households, according to Goldman Sachs.

Note, in passing, that the renewed political uncertainty in France – following the announcement of a vote of trust that the Bayrou government will have to overcome on September 8 – did not really have an impact on the Euro.

“Unless a radical change in the political landscape, we do not consider that the evolution of the situation in France will constitute a lasting engine for the euro during the rest of the year”, judges Deutsche Bank.