empty
26.06.2025 12:43 AM
The Euro Regains the Initiative

The euro is attempting to resume its upward movement, although not many economic reasons support this scenario. Inflation in May rose in line with the European Central Bank's expectations, which only strengthened the case for continued rate cuts, and business activity indices remained weak. The manufacturing sector stayed at April's level of 49.4 points—showing no improvement at all—while the services sector posted 50 points, slightly better than April's 49.7 points.

Like most other currencies, the euro's rise is largely due to U.S. dollar weakness. Analysts at Nordea Bank believe that the recent declines in both the U.S. dollar and long-term U.S. bonds mark the beginning of a loss of investor confidence in the U.S. In their view, this process is accelerating.

Previously, the yield on long-term U.S. bonds correlated quite closely with the dollar index, but as seen in the chart below, a significant divergence occurred after the announcement of "U.S. Liberation Day."

This image is no longer relevant

Trump's bill currently under discussion in Congress—more widely known as the Big Beautiful Bill—could support the real economy, but it would create issues for the financial sector. The supply of bonds would increase, which in turn would raise the risk premium.

The Federal Reserve is in no hurry to cut rates, and this ostensibly bullish signal for the dollar has had no effect. At the same time, more opinions are emerging suggesting that the ECB is unlikely to cut rates further—at least, swap markets see no such cut by year-end.

The Big Beautiful Bill being pushed by Trump could lead to higher inflation in the U.S., rising interest rates, and, therefore, higher yields. In the past, this would have been seen as a bullish signal for the dollar since higher yields increase demand for the currency. However, in recent months, the Fed has drastically slowed its pace of rate cuts while the ECB has followed a more predictable path. Despite significantly higher yields in the U.S., this hasn't helped the dollar, and this outcome may indicate that investor confidence in the dollar is waning. As a result, real yields—adjusted for rising risks—are noticeably lower.

No important news is expected from the eurozone until the end of the week. On Friday, the European Commission will publish another forecast package, which traditionally has little effect on financial markets. Only some unexpected factor—not yet priced in by markets—could disrupt the euro's upward trend, and such surprises cannot be ruled out given Trump's unpredictability.

Net long positions on the euro grew by an impressive $1.29 billion during the reporting week, reaching $14.57 billion. The bullish bias in speculative positioning is more than evident, and the estimated price is turning upward again—confirming the prospects for continued EUR/USD growth.

This image is no longer relevant

The euro had consolidated over the past two weeks near a 3.5-year high, and there were reasons to expect at least a corrective decline. However, the easing of geopolitical tensions—which had also threatened Europe with reduced oil supply and rising energy costs—has suddenly faded as quickly as it emerged. In the current environment, the euro has once again gained prospects for continued growth. From a technical perspective, the likelihood of a correction remains low, with a long-term target of 1.2350.

Kuvat Raharjo,
Analytical expert of InstaForex
© 2007-2025
Summary
Urgency
Analytic
Evgeny Klimov
Start trade
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

AUD/JPY. Analysis and Forecast

Today, Tuesday, during the European session, the AUD/JPY pair reached the round level of 97.00. The yen continues to show relative weakness amid growing expectations that the Bank of Japan

Irina Yanina 12:44 2025-07-15 UTC+2

EUR/USD. Analysis and Forecast

On Tuesday, the EUR/USD pair is gaining positive momentum, recovering from more than two weeks of declines triggered by Trump's threat to impose new tariffs. On Saturday, Trump announced plans

Irina Yanina 12:30 2025-07-15 UTC+2

The European Union Finalizes Second List of Countermeasures

The European Union has finalized its second list of countermeasures against U.S. goods, totaling 72 billion euros. This step comes in response to the ongoing trade tensions between

Jakub Novak 11:25 2025-07-15 UTC+2

Trump's Actions Alarm Germany

While the euro remains relatively stable, German Chancellor Friedrich Merz is not feeling as confident. In a recent interview, he stated that U.S. President Donald Trump's threat to impose 30%

Jakub Novak 11:11 2025-07-15 UTC+2

Rising Inflation in the U.S. Will Decrease the Likelihood of Fed Rate Cuts (Possible Resumption of USD/CAD and Bitcoin Growth)

While President Donald Trump continues playing his favorite game called "Make America Great Again," market participants are calculating the cost of U.S. trade wars with nearly the entire world

Pati Gani 09:58 2025-07-15 UTC+2

The Market Will Break Out of Its Cage

Deep down, markets still believe tariffs could become an inflationary force. However, without confirmation from official data, investors are not ready to sell the S&P 500. They've grown accustomed

Marek Petkovich 09:14 2025-07-15 UTC+2

What to Pay Attention to on July 15? A Breakdown of Fundamental Events for Beginners

Several macroeconomic reports are scheduled for Tuesday. The key report of the day is, of course, the U.S. Consumer Price Index (CPI). Why is it important? At the moment, inflation

Paolo Greco 07:27 2025-07-15 UTC+2

GBP/USD Overview – July 15: U.S. Budget Turns Surplus — What's Next?

The GBP/USD currency pair continued to trade lower on Monday, despite the lack of any strong fundamental reasons for such a move. Of course, one can always find or even

Paolo Greco 03:58 2025-07-15 UTC+2

EUR/USD Overview – July 15: No Agreement Signed with the EU. Mexico Gets Caught in the Crossfire

The EUR/USD currency pair traded very calmly throughout Monday, as the market continued to ignore Trump's tariff hikes. If the euro remains flat while the British pound is actively falling

Paolo Greco 03:58 2025-07-15 UTC+2

The Budget Is Now in Surplus, but the National Debt Isn't Falling

Last Friday, the U.S. Treasury Department announced the first budget surplus since 2017. Many in the market may have interpreted this as great news for the dollar

Chin Zhao 00:48 2025-07-15 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.