Euro to US dollar expected to break parity by the end of the year, accelerating the decline of US dollar dominance

The euro is quietly reshaping the global foreign exchange market landscape. Since 2025, the euro against the US dollar has risen a total of 7%, and the latest assessments from several top international financial institutions point to an astonishing target — the euro may reach parity with the dollar by the end of the year. This is no longer a distant vision but an increasingly imminent reality.

What is driving this shift? Analysts indicate that the trust crisis facing the dollar has become the biggest boost for the euro’s rise. As Trump’s trade policies continue to escalate, the halo of the dollar as the global reserve currency is fading.

US Dollar in Deepening Crisis, Trust Foundations Shaking

As the cornerstone of the global economic order, the dollar’s position has long been considered unshakable. However, recent policy changes are altering this perception. The decline of American exceptionalism, tariffs impacting the economy, and the Federal Reserve’s continued easing policies—these factors combined are creating an unprecedented trust crisis for the dollar.

In April 2025, the euro surged 1% against the dollar in a single day, with the rate briefly breaking through 1.1063, signaling a clear shift in investor sentiment. Goldman Sachs’ analysis team pointed out that foreign exchange hedging strategies are undergoing profound changes, and the risk of further dollar depreciation is rising.

Safe-Haven Assets Shift, Euro Allocation Gains Value

Europe is transforming from an economic problem zone into a new safe haven in the eyes of global investors. The key to this shift lies in Europe’s proactive strategies—aggressively increasing safe asset supplies, strengthening defense spending, and implementing loose fiscal policies. These measures not only stabilize economic expectations but also enhance the euro’s appeal as a safe-haven asset.

Deutsche Bank’s view is straightforward: the euro is becoming a “substitute” for the dollar. The German financial giant notes that if the euro can return to the levels it held in the 2010s (more than a quarter of global foreign exchange reserves), it would mean an inflow of over 600 billion euros—an amount capable of reshaping market dynamics.

Historical data further highlights the euro’s opportunity. Over the past decade, the euro’s share of global foreign exchange reserves has fallen from over a quarter to one-fifth, mainly due to the eurozone debt crisis and subsequent negative interest rate policies. Now, as these negative factors gradually dissipate, the euro is poised for a rebound.

Consensus Among Major Institutions, Bullish Sentiment Continues

The consensus among institutions further reinforces expectations of euro appreciation. JPMorgan Asset Management’s EMEA Chief Market Strategist Karen Ward explicitly states that Europe is experiencing a triple stimulus—monetary, fiscal, and regulatory—which is the fundamental reason why European assets outperform and the euro is stronger than the dollar—even in a declining interest rate environment.

UBS analysts offer a more aggressive view from a comparative perspective: the damage from US tariffs to the US economy will significantly exceed the impact on the eurozone. This implies that the Federal Reserve’s future easing space will far surpass that of the European Central Bank, further pushing down the dollar’s relative value. Based on this logic, UBS has raised its euro-dollar forecast to reach 1.14 by March 2026.

Nomura Securities also believes that the eurozone is brewing a “structural reorganization,” which will fundamentally support the euro’s long-term appreciation. The performance of traders also confirms this view—they are continuously increasing bets on the European Central Bank cutting interest rates, expecting four more rate cuts in 2025.

Year-End Outlook: 1.12-1.14 Becomes the New Focus

Based on analyses from several top institutions, the market is gradually converging on the target of euro-dollar parity by the end of the year. Research from UBS, Goldman Sachs, JPMorgan, and others points to a range of 1.12-1.14, which reflects not only technical positioning but also collective judgment on future policy and economic trends.

JPMorgan also notes that although trade wars will cause an additional 0.5% reduction in eurozone GDP, accumulating to a 1.5% impact by the end of 2026, this is not enough to push the eurozone into recession. Instead, it highlights Europe’s relative economic resilience.

From a historical perspective, the euro’s rebound from being significantly undervalued against the dollar is playing out as a currency market power shift. The dominance of the dollar is loosening, and the euro’s upward trajectory is gradually being established. In the context of the accelerating reshaping of the global economic map, the euro-dollar parity by year-end is just a waypoint in this transformation.