Dollar Index Slide Sparks EUR/USD Surge Amid US Treasury Concerns

The EUR/USD currency pair has been trading near its three-month high of 1.1740, but experts warn that this is not a sign of a euro breakout, rather a dollar unwind reversing a first-half decline.

The pair has strengthened by 2.76% over the past thirty days and is up 1.15% so far in August after gaining 1.02% in July. However, it remains roughly 0.5% lower for 2026 after beginning the year near 1.1733.

The dollar index has fallen to a three-month low of 98.723, which is largely responsible for the euro's rally. This move is attributed to concerns about US Treasury market conditions and the government's expanded programme of long-dated debt buybacks, rather than any improvement in the eurozone economy.

The current situation is fragile, as it relies on the market continuing to believe that the Treasury will deploy its firepower and that neither the Treasury nor the Fed will reverse course. A dollar index that stabilizes above 98.723 would cap EUR/USD below 1.1740, while a break of that level opens up the possibility of reaching 1.18 or beyond.