empty
16.04.2025 01:08 AM
The Euro Scared Itself with Its Own Momentum

The euro's surge to the area of three-year highs became possible thanks to Germany's fiscal stimulus, Donald Trump's trade policy, and a capital outflow from North America into Europe. When investors stopped buying stock indices in the EU, they turned their attention to German bonds. These became the alternative to Treasuries and helped push EUR/USD higher.

Some are mesmerized by the rollercoaster in the S&P 500, others by the sell-off in U.S. Treasury bonds, and some can't take their eyes off Germany's debt instruments. German bond yields have returned to the levels from which their rally began—after the Bundestag amended the fiscal brake rule. The peak was reached in mid-March, after which investors fled to safe havens, reversing the upward trend in yields.

German bond yield dynamics

This image is no longer relevant

In theory, a widening yield spread in favor of U.S. Treasuries should lead to a drop in EUR/USD due to the increased attractiveness of U.S. assets. In practice, the surge in U.S. bond yields is the result of foreign investor sell-offs—former allies of Washington turning into rivals.

Treasury Secretary Scott Bessent calmed the markets with a statement that the Treasury has an arsenal of tools capable of knocking the wind out of any opponent. The stabilization of yields and their spread relative to German bonds resembled the calm before the storm, keeping EUR/USD stuck in a narrow trading range.

The main currency pair is waiting for signals from the U.S. stock market and ignoring the sharp drop in investor confidence in the German economy. The ZEW expectations index collapsed from 51.6 to -14 in April due to concerns over the White House's tariff impact on the German economy.

Investor confidence in the German economy

This image is no longer relevant

It's worth noting that the capital flow from North America to Europe is not the only driver of the EUR/USD rally. According to forecasts from The Wall Street Journal, U.S. GDP is expected to grow by a modest 0.8% in 2025—about the same as in Europe. That's quite unusual, considering tariffs' damaging effects on the export-driven eurozone. Analysts likely considered the sharp rise in German exports in 2024, which hit the highest level since 2002.

This image is no longer relevant

However, this was driven by front-loaded U.S. imports ahead of Donald Trump's inauguration. Going forward, Germany's economy is unlikely to perform as well as it did at the 2024–2025 turn. This factor could hinder further euro appreciation, especially ahead of the European Central Bank's expected rate cuts.

From a technical perspective, a so-called inside bar has formed on the daily EUR/USD chart, signaling market indecision. A breakout below the lower boundary around 1.129 would justify short-term selling, while a successful push above the upper boundary near 1.143 would open the door for buying.

Marek Petkovich,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

The Pound Ignores Weak Data and Persistently Tries to Continue Rising

The macroeconomic data from the UK published last week looks frankly weak—everything is in the red zone, meaning worse than expected. Nevertheless, the pound continues to climb upward regardless

Kuvat Raharjo 19:36 2025-06-16 UTC+2

CFTC Report: The Dollar Is Being Sold Off Again. Awaiting New Revelations from Trump

Five weeks ago, the total short position on the U.S. dollar against major currencies stopped increasing, which gave reason to believe the dollar might begin an offensive in the currency

Kuvat Raharjo 12:14 2025-06-16 UTC+2

GBP/USD. Analysis and Forecast

Today, the GBP/USD pair is attempting to regain positive momentum while remaining on the defensive. Traders prefer to wait for the release of key data before opening directional positions

Irina Yanina 12:10 2025-06-16 UTC+2

EUR/USD. Analysis and Forecast

Today, the EUR/USD pair is attempting to regain positive momentum, approaching the psychological level of 1.600 and price levels last seen in 2021. Traders are eagerly awaiting the important political

Irina Yanina 12:08 2025-06-16 UTC+2

The Israel-Iran Confrontation. Fed Meeting. What's Next? (I expect further decline in USD/CAD and a local pullback in gold before a new wave of growth)

Israel and Iran are exchanging missile strikes, but it seems markets are trying to play their own game, assuming that this conflict will not cross the nuclear threshold

Pati Gani 10:51 2025-06-16 UTC+2

EUR/USD: War Is No Ally to the Greenback

At the start of the new trading week, the EUR/USD pair stayed within the 1.15 range and is even trying to approach the resistance level of 1.1600 despite the ongoing

Irina Manzenko 10:32 2025-06-16 UTC+2

What to Pay Attention to on June 16? A Breakdown of Fundamental Events for Beginners

No macroeconomic reports are scheduled for Monday, but the market does not lack news. This week, Donald Trump announced his intention to raise all import tariffs, as none

Paolo Greco 06:46 2025-06-16 UTC+2

GBP/USD Overview – June 16: How Trump Is Undermining the Dollar

The GBP/USD currency pair will remain under the influence of geopolitics and politics in the new week. Essentially, we've been saying the same thing every day for the past four

Paolo Greco 04:54 2025-06-16 UTC+2

EUR/USD Overview – June 16: The Israel-Iran Conflict Changes Nothing

The EUR/USD currency pair moved sharply back and forth throughout Friday. The pair traded with high volatility for two consecutive days, and there is a clear and logical explanation

Paolo Greco 04:54 2025-06-16 UTC+2

EUR/USD. Weekly Preview. Focus on the Middle East and the Federal Reserve

The final trading day of last week ended on an uncertain note. Reacting to Middle East developments, the EUR/USD pair sharply declined on Friday, retreating from the multi-year price high

Irina Manzenko 01:30 2025-06-16 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.