The U.S. economy was growing at an annualized rate of 4.4% last year (the most recent period for which we have a GDP number), and inflation is in decline. The stock market is up nearly 12% over the last 12 months. On paper, that would suggest investors ought to have strong confidence in the U.S. dollar. Yet the opposite is true. The U.S. dollar remains in decline. It’s down 9.4% over the last 12 months and was down nearly 10% for 2025, as measured against a standard basket of foreign currencies. There are ups and downs, of course. But the greenback has been trending down since 2022.
The dollar has lost 8% of its value against the British pound over the last 12 months—which is shocking because U.K. annual economic growth (1.3%) is anemic compared to its American cousin.
And while the White House’s official position is that Europe faces “civilizational erasure,” currency traders have a different view. The dollar is down nearly 12% against the euro over the last 12 months. Each dollar today buys only 84 cents in Paris.
Equity traders agree with them. The Stoxx Europe 600 is up nearly 4% year-to-date. The S&P 500, by contrast, is down 0.14%.
What’s going on? The “Sell America” trade remains in effect, according to ING analyst Francesco Pesole. Although the U.S. economy is technically robust, there are several headwinds keeping the dollar down.
First, unemployment is rising and hiring is weak, as illustrated by these charts from Lawrence Werther and Brendan Stuart at Daiwa Capital Markets:
The January job creation number is likely to be revised down in the coming months, some economists believe, because it came in unexpectedly high, suggesting it may have been a statistical quirk that will get ironed out as better data comes in.
One of the key mandates of the U.S. Federal Reserve is to support the labor market. Weak job numbers will likely tempt the Fed into delivering new rounds of cheaper money to boost the economy. Although the Fed kept interest rates on hold at the 3.5% level at its January meeting, most Wall Street analysts expect the central bank to deliver two more cuts to the rate this year.
With the prospect of dollar assets paying less interest in the future, traders are staying away.
“The past couple of weeks have shown that the improvement in the U.S. macro picture isn’t enough to bring the dollar back to early January levels,” Pesole told clients this morning.
“The mid‑January ‘sell America’ episode is leaving lasting damage on the greenback—much like in summer 2025. Last week’s post‑payrolls reaction confirmed that confidence hasn’t returned.”
“The dollar has lost a good chunk of its safe-haven value,” he said.
Here’s a snapshot of the markets this morning:
- U.S. markets are closed for a national holiday today. The S&P 500 closed flat at 6,836.17 in its last session.
- STOXX Europe 600 was up 0.33% in early trading.
- The U.K.’s FTSE 100 was up 0.22% in early trading.
- Japan’s Nikkei 225 was down 0.24%.
- China’s CSI 300 is closed for Chinese New Year.
- The South Korea KOSPI is closed for Chinese New Year.
- India’s NIFTY 50 was up 0.83%.
- Bitcoin rose to $68.9K.
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