empty
19.03.2025 12:46 AM
The Euro Fires a Bazooka

The last time Germany armed itself was in the 1930s, it led to World War II. Today, German militarization is welcomed. According to Bloomberg estimates, fiscal stimulus packages worth around $1 trillion will add one percentage point to GDP in the near term, bringing it to 2% by 2024. This will push bond yields higher, and the narrowing spread with U.S. Treasuries will create a strong foundation for a long-term uptrend in EUR/USD. Is it time to jump on the last northbound train?

Germany's Bond Yield Dynamics

This image is no longer relevant

Germany's shift from fiscal restraint to fiscal expansion is being compared to the Marshall Plan, which helped rebuild Europe after World War II. As the U.S. moves to curb government spending, this divergence in fiscal policy—which previously favored EUR/USD bears—now favors the euro. Instead of American exceptionalism, we now see German exceptionalism.

The currency pair broke through key resistance at 1.091 and climbed toward 1.095, fueled by growing confidence in German business. The ZEW economic expectations index surged to its highest level since February 2022, driven by hopes for large-scale stimulus packages from Friedrich Merz. The current conditions indicator also improved.

Investor Confidence in Germany's Economy

This image is no longer relevant

The euro's long-term outlook remains positive, but the EUR/USD rally may be limited in the short term for three reasons. First, the "Trump trade" has run its course. Second, the market is overestimating the risk of a U.S. recession. Third, expectations for aggressive Federal Reserve monetary easing are likely exaggerated.

The U.S. dollar index strengthened by 7% from its September lows thanks to the "Trump trade"—investors betting on U.S. economic acceleration and the Fed keeping rates high. However, by mid-March, EUR/USD had returned to its levels from the November elections, recovering most of its previous losses. It's time to reap the profits.

According to Treasury Secretary Scott Bessent, the U.S. economy is in good shape with no signs of an impending recession. Investors were spooked by Donald Trump's comments, where he did not rule out an economic slowdown or a series of disappointing data releases. However, other reports suggest that the economy remains stable. Renewed market optimism could drive renewed dollar buying alongside the gradual scaling back of expectations for Fed rate cuts. Markets anticipate a 70-basis-point cut by the end of 2025—likely too much.

On the daily EUR/USD chart, an "Anti-Turtles" pattern may be forming. A drop below support at 1.089 would be a signal to sell. However, buying strategies could regain momentum if the pair fails to reach that level or bounces back after testing it.

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 April 8? A Breakdown of Fundamental Events for Beginners

Once again, no macroeconomic events are scheduled for Wednesday. However, the market is paying little attention to traditional macroeconomic indicators, so standard economic reports are unnecessary. The market is entirely

Paolo Greco 06:57 2025-04-09 UTC+2

GBP/USD Overview. April 9. Disinformation, Rumors, Fakes, and Opinions

The GBP/USD currency pair traded relatively calmly on Tuesday, but Monday brought a full-on whirlwind to the markets. For several days now, we've been using terms like "storm," "chaos,"

Paolo Greco 02:55 2025-04-09 UTC+2

EUR/USD Overview. April 9. The American Circus

The EUR/USD currency pair traded much more calmly on Tuesday. That's no surprise—the market has already reacted to all the news about tariffs and counter-tariffs, and the actual implementation date

Paolo Greco 02:55 2025-04-09 UTC+2

NZD/USD. Analysis and Forecast

The NZD/USD pair is attempting to regain positive momentum, supported by renewed US dollar selling. However, given the underlying fundamentals, bullish traders are advised to proceed with caution. Investors appear

Irina Yanina 19:45 2025-04-08 UTC+2

Market gives away its secret

The world is a stage, and people are its actors. Tragicomedies happen every day in financial markets, but what happened at the start of the second week of April

Marek Petkovich 11:49 2025-04-08 UTC+2

Will Tomorrow Be Better Than Yesterday? (There is a risk of renewed decline in AUD/USD and gold prices)

It's easy to stay optimistic and hope that decision-makers act according to your wishes. Why does this occur? And why can it be a trap for investors? The market sell-off

Pati Gani 09:25 2025-04-08 UTC+2

What to Pay Attention to on April 8? A Breakdown of Fundamental Events for Beginners

There are no macroeconomic events scheduled for Tuesday. However, the current market environment is hardly affected by the macroeconomic background. At this moment, the market has no use for standard

Paolo Greco 07:35 2025-04-08 UTC+2

GBP/USD Overview. April 8. Now It's the Pound Plunging into the Abyss

The GBP/USD currency pair continued its near-crash-like decline throughout Monday. Can anyone even explain, in hindsight, what's happening in the markets right now? There are no questions regarding the drop

Paolo Greco 06:07 2025-04-08 UTC+2

EUR/USD Overview. April 8. 2025 – The Year of Trade Wars

The EUR/USD currency pair traded with notable volatility on Monday. Particularly for a so-called "boring Monday," with no significant events scheduled. Yet yesterday was anything but boring—many experts have already

Paolo Greco 06:07 2025-04-08 UTC+2

The Pound Attempts to Hold Within the Bullish Channel

The United Kingdom is among the few G20 countries that got off relatively lightly—it was hit with a 25% tariff on car exports and a 10% tariff on other goods

Kuvat Raharjo 00:58 2025-04-08 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.