Trump tariffs bleed US dollar dry, boosting euro

US President Donald Trump's tariff policies and statements regarding restructuring the Federal Reserve have contributed to a sharp fall in the US Dollar Index to 97.9, its lowest level since March 2022, following a downward trend that began in February.

The euro/US dollar parity rose to its highest level since November 2021, reaching 1.1573.

Since the beginning of the year, the euro has increased its value against the US dollar by more than 11%. The surge followed Trump's April 17 statement that he was "not happy" with Fed Governor Jerome Powell and wanted him fired.

National Economic Council Director Kevin Hassett said on Friday that the Trump administration is “studying” ways to fire Powell.

Despite recent interest rate cuts by the European Central Bank (ECB), the euro has remained strong.

Analysts say the euro is increasingly viewed as a “safe-haven” currency amid Washington's trade volatility and as Europe ramps up defense spending in response to the war in Ukraine.

- Tariff policy and global backlash

Cuneyt Paksoy, a Turkish market strategist, told Anadolu that the rise in the euro/US dollar parity was both swift and unexpected. He said the main reason the US Dollar Index fell and the exchange rate rose was Trump's tariff crisis and the resulting backlash.

Paksoy mentioned that multiple institutions have said Trump's protectionist trade policies would harm the US economy in the long term.

“We see many anti-Trump protests across the country, which shows that despite his sweeping victory, he has yet to gain the support he expected. The anticipated good results of his policies have yet to come, and despite the 90-day tariff pause, Trump is still receiving serious reactions from major countries, such as Japan,” he said.

Paksoy emphasized that Beijing's statements inferring harsh retaliation against countries that tariff China in alignment with the US have also worked against Washington.

Moreover, he said Powell's recent speech touched on some important details, but he noted that “for the first time in a long time, a Fed chair spoke about the US' debts and their potential risks to the economy.”

US bonds have also lost their safe-haven feature as the gap between 2-year and 10-year bonds has widened, he said, adding that despite negotiations, Trump has yet to deliver on his promise to bring peace to Ukraine.

Noting that Trump's policies have not been well received, Paksoy pointed out that demand for US assets remains weak, while the euro continues to strengthen, adding, "It is important to discuss how much the rise in the exchange rate will benefit Europe."