empty
24.04.2025 12:59 AM
The Euro Takes a Hit Below the Belt

There will be no winners in trade wars. The U.S. will suffer due to a loss of trust in the dollar and other American assets, while Europe will suffer from an economic slowdown—which is already starting to show. The Eurozone composite Purchasing Managers' Index (PMI) fell to 50.9 in April, failing to meet Bloomberg experts' expectations. The two largest economies in the currency bloc, Germany and France, both fell below the critical level of 50, which separates expansion from contraction.

Eurozone Business Activity Trends

This image is no longer relevant

The biggest negative surprise came from Germany's PMIs, which fell below the critical threshold for the first time in four months. According to Bundesbank President Joachim Nagel, tariffs and the EU's trade war with the U.S. will lead to a recession in Germany. While fiscal stimulus from Friedrich Merz and monetary expansion from the European Central Bank may eventually pull the country out of the abyss, difficult times lie ahead.

Credit Agricole agrees, stating that investors have overestimated the loss of confidence in the U.S. dollar. The bank considers the eurozone and Japan to be the main casualties of trade wars due to their export-oriented economies. It forecasts a decline in EUR/USD to 1.08 by the end of the year.

ING, by contrast, warns that renewed threats from Donald Trump directed at Jerome Powell could push the pair toward 1.20 — although, at present, this appears to be more of a peak in dollar skepticism. In the short term, EUR/USD bears may trigger a correction, but in the second half of the year, a slowdown in the U.S. economy and a renewed easing cycle by the Federal Reserve may further weaken the dollar and lift the euro toward 1.15.

I believe markets are beginning to sense Donald Trump's interest in rising U.S. stock indices. This is evident in the 47th president's conciliatory tone. He has no intention of removing Powell from his post as Fed Chair and promises to be "very nice" to China. Without the recent S&P 500 crash, it's unlikely a Republican would be speaking this way.

Speculative Positioning Trends for the USD Index

This image is no longer relevant

A lifeline from the White House could help stabilize the broad stock index, which may cause traders to question the continuation of the dollar's sell-off. This is especially true since speculative long positions on the U.S. dollar have been declining rapidly, pushing the USD index into bear territory. Before moving further south, the market may need to shed some weight.

This image is no longer relevant

Overall, eurozone economic weakness could raise doubts about the sustainability of the euro's rally against the U.S. dollar, increasing the risks of consolidation.

Technically, a pin bar with a long lower shadow is forming on the daily EUR/USD chart. This indicates weakness among bears and provides a basis for renewed buying if resistance at 1.1425 is broken.

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

What to Pay Attention to on May 22? A Breakdown of Fundamental Events for Beginners

There are several important macroeconomic reports scheduled for release on Thursday. Business activity indexes for May's services and manufacturing sectors will be released in Germany, the Eurozone, the United Kingdom

Paolo Greco 06:31 2025-05-22 UTC+2

The Bank of England to Slow Down the Pace of Policy Easing

The Bank of England recently cut interest rates for the second time in 2025, justifying its decision with slowing inflation and steady movement toward the target level. But no sooner

Chin Zhao 00:05 2025-05-22 UTC+2

The Dollar Sawed Off the Branch It Was Sitting On

Can the euro be considered a strong currency? I have significant doubts about that. An independent group of economic advisors to Friedrich Merz forecasts that the German economy will enter

Marek Petkovich 00:05 2025-05-22 UTC+2

The Yen Goes on a Buyer Strike

A collapse in confidence in the U.S. dollar, rumors of coordinated currency intervention, and capital repatriation to Japan are driving USD/JPY back into a downtrend. The music playing

Marek Petkovich 00:05 2025-05-22 UTC+2

EUR/USD: Continued Weakness in the U.S. Dollar

The four-week-long southern impulse we saw in EUR/USD has fully faded. Last week, sellers pushed the pair to a monthly low at 1.1066, but then seemed to "fear their

Irina Manzenko 18:59 2025-05-21 UTC+2

High Inflation Supports the Pound. GBP/USD Outlook

The UK Consumer Price Index (CPI) rose from 2.6% to 3.5% in April, surprising the market, which had expected an increase to 3.3%. The core CPI also exceeded forecasts

Kuvat Raharjo 18:47 2025-05-21 UTC+2

USD/CAD. Analysis and Forecast

The USD/CAD pair is attracting sellers for the third consecutive day. A break below the 1.3900 level signals increased selling pressure, which could lead to further downside. Rising oil prices—driven

Irina Yanina 18:41 2025-05-21 UTC+2

USD/CHF. Analysis and Forecast

For the third consecutive day, the USD/CHF pair continues to lose ground. The fundamental backdrop suggests that the path of least resistance remains to the downside. The pair has been

Irina Yanina 18:38 2025-05-21 UTC+2

GBP/JPY. Analysis and Forecast

Following the release of UK consumer inflation data, which came in above expectations, the GBP/JPY pair slightly pared back its intraday losses. However, it failed to attract significant buying interest

Irina Yanina 11:25 2025-05-21 UTC+2

Will Global Central Banks Continue to Cut Interest Rates? (Bitcoin May Resume Growth and USD/JPY May Decline)

Among the economically developed nations—those that belong to the Western wing of the global economy—there is an important rule: a target of 2% inflation, specifically consumer inflation. Achieving this target

Pati Gani 09:46 2025-05-21 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.