The euro is on track to chalk up its longest winning streak in eight years, buoyed by growing confidence in the euro zone’s economic outlook and—perhaps more tellingly—a global appetite for anything that isn’t the U.S. dollar.

The single currency has surged over 3% in June, its sixth consecutive monthly gain, while the Bloomberg Dollar Spot Index continues its decline, now hovering near a three-year low. Last week alone, the dollar index dropped 1.2% as markets absorbed the rather grim reality of American macroeconomics—and the increasingly reckless political noise surrounding it.

The divergence is stark. Investors are pricing in at least two rate cuts from the Fed this year, while the European Central Bank (that bastion of caution) is nearing the end of its loosening cycle. With markets expecting around 60 basis points of Fed easing compared to a mere 25 from the ECB, it’s no surprise the dollar is suffering: currencies with higher yields tend to have the upper hand. Currently, the dollar appears to be a risky bet.

Speculators are piling in—or rather, out. Net short positions on the greenback reached $20.1 billion as of 24 June, the most bearish stance since mid-2023, according to the CFTC. Hedge funds have also reversed course on the euro, turning bullish for the first time since April. Apparently, Trump’s monetary fantasies are having real-world consequences.

Indeed, the market’s growing discomfort isn’t just about macro data—it’s about who might be calling the shots at the Fed next. There is mounting speculation that Donald Trump’s hand-picked replacement for Jerome Powell will follow orders, notably his demands for aggressive rate cuts.

Some analysts forecast a further 9% drop in the dollar index should Trump appoint a compliant successor to Powell this year—a chilling prospect, given the index is already down nearly 9% year-to-date.

As tensions in the Middle East recede from headlines, the dollar’s status as a safe haven has begun to erode. The euro continues to feed off persistent pessimism about the dollar.

It gets worse. European policymakers are now openly discussing ways to bolster the euro’s global stature. And why not? The risk-reversal curve on the dollar has turned decisively negative, signalling long-term expectations of further decline.

On Friday, data showed a sharp drop in U.S. consumer spending growth, the steepest since the start of the year, while the Fed’s preferred inflation gauge, the core PCE index, rose slightly more than expected, hardly the stuff of dollar optimism.

Higher PCE and lower personal spending feed the stagflation narrative, which is not exactly a winning formula for the greenback.

And then, of course, there’s Trump. The man who once flirted with the idea of installing a “phantom” Fed chair to circumvent Powell altogether. The man who thinks central banking should be more about obedience than independence. As the campaign trail heats up, the spectre of Trumpian monetary policy, where loyalty trumps logic, hangs over the dollar like a bad trade.

In short, the dollar’s weakness isn’t just economic—it’s institutional, political, and potentially structural. The currency that once symbolised strength and stability is now at the mercy of a political spectacle.