U.S. Dollar Faces Long-Term Weakness as European Markets Eye Opportunity for Growth

The U.S. dollar is projected to weaken over the long term due to unsustainable fiscal debt and trade imbalances in the world’s largest economy, according to Patrick Thomson, EMEA CEO of JPMorgan Asset Management. Speaking at an International Capital Markets Association conference in London, Thomson noted that while the dominance of U.S. Treasuries remains intact, fixed-income investors are increasingly concerned about the long-term sustainability of elevated U.S. debt levels. Although the dollar recently gained nearly 2% as a safe-haven asset following the outbreak of the Iran war, it experienced sharp declines last year driven by U.S. policy uncertainty and the implementation of “Liberation Day” tariffs.

This shifting dynamic has positioned Europe as a major beneficiary, with investors actively seeking diversification through the euro and Chinese yuan. Despite economic challenges brought on by the regional conflict, JPMorgan Asset Management has reported substantial business growth in Europe, now managing over a trillion dollars in assets. This influx of capital is being driven by increased fiscal spending in Germany, a strategic push by policymakers to mobilize household savings, and a renewed appeal for European companies and investment opportunities as portfolio diversifiers.

However, financial experts emphasize that Europe must implement critical reforms to effectively compete with the United States. Thomson pointed out that unlocking retail bank deposits and encouraging individual market participation represents a massive opportunity to drive new market issuance and demand. Echoing this sentiment, Euroclear CEO Valerie Urbain stated that for Europe to truly rival the U.S. financial landscape, it must develop deeper, more integrated capital markets by actively attracting a larger volume of both investors and issuers.

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