The US dollar’s retreat has marked its worst first half since 1973, with a 10.8% decline against a basket of currencies. This significant drop is largely attributed to fiscal uncertainty, particularly concerns over Donald Trump’s “big beautiful” budget bill and its potential to inflate the national debt, thereby undermining the dollar’s safe-haven role.
The euro has gained 5% against the struggling dollar, as noted by Unicredit. Rising expectations of US interest rate cuts, pushed by Trump’s critiques of the Federal Reserve, have further hurt the dollar. Despite this, the S&P 500 of US stocks remarkably rebounded to a record high by the end of June, suggesting that while the currency faces headwinds, other segments of the market are finding strength, particularly in technology and AI, and the anticipation of policy adjustments.