Planning a European Vacation This Summer? The Exchange Rate Just Became Your Enemy

Sorry, jet-setting Americans — your wallet just got a lot lighter abroad. This year, the ICE US Dollar Index recorded its worst first-half showing in over 50 years, with the greenback tumbling 13% against the euro and 6% against the Japanese yen. Back in 2024, a strong dollar made international travel a bargain — but now, growing concerns over national debt, shifting trade policies, and narrowing interest rate gaps are dragging it down.

• Travel spending pulled back in June, as airline passenger services dropped 2.7% and hotel prices sank 4.1%, reflecting weaker demand from both domestic and international travelers.
• Despite unfavorable exchange rates, one in four US consumers surveyed by Deloitte in May still intended to travel abroad within the next three months.

The irony tax: While travelers are getting squeezed, the dollar’s decline is creating opportunities elsewhere. American exporters are celebrating as a weaker dollar makes their goods more competitive overseas, while investors are riding the wave of global outperformance — with Vanguard’s Total International FundVTIAX

up 17% this year, outpacing the S&P 500’s 6.6% gain. J.P. Morgan’s David Kelly is urging clients to diversify beyond US stocks, warning that “the fundamentals have been gradually deteriorating beneath the economy of the dollar.” So while that overpriced cappuccino in Rome might sting, at least your diversified portfolio is picking up the tab.