The rise and rise of the USD

What’s happening to the euro?

The incoming Trump administration has rattled the euro, which is widely expected to reach parity with the USD in the coming months.

The notion that the USD is a fading force in world trade is misplaced, as the following chart clearly indicates. Nearly half of all SWIFT payments are made in USD, and that figure has been increasing since 2020.

The share of the euro decreased due to the reduction of EU trade with Russia (in particular, gas and oil). Meanwhile, the yuan settlement has fallen below the level of the Japanese yen. That’s according to MPG Business and Finance.

The EUR/USD pair has fallen sharply from the 2024 peak of above 1.12 in September, marking a 9% decline over three months.

“The US dollar’s strength, bolstered by Donald Trump’s presidential victory, has exacerbated the euro’s weakness since November,” records Euro News.

What this means is that EUR/USD parity is now within sight. The last time this occurred was in 2022 when Russia marched into Ukraine. Ukraine halted Russian gas transit through its territory in January following the expiration of a five-year contract. Add to that the sabotage of the Nordstream pipeline supplying Europe with Russian gas (the culprit widely suspected to be the US). This means Europeans are relying on costlier sources of heating now that winter has descended, while S&P Global PMI (Purchasing Managers Index) shows continued contraction in Germany and France.

The US Dollar Index has been on a rampage since the US Federal Reserve signaled a far more aggressive bout of rate cutting in 2025, flanked by the ascendancy of the Trump movement. The US Dollar Index measures the USD against a basket of currencies.

US Dollar Index

Source: Market Watch

Don’t bet on the demise of the USD any time soon. There’s life left on the old beast yet.