empty
23.04.2025 12:08 AM
The Dollar Has Been Replaced. Nature Abhors a Vacuum

Fear paralyzes, but action persists. Investors are slowly overcoming their concerns over Donald Trump's attacks on the independence of the Federal Reserve and are starting to lock in profits on long EUR/USD positions amid the IMF's downbeat forecasts. Yes, the U.S. dollar is no longer viewed as a safe-haven asset, but the euro remains a pro-cyclical currency—its value is tied to the state of the global economy, which doesn't look particularly bright in the near term.

The IMF has cut its forecast for global GDP from 3.3% to 2.8% for 2025 and from 3.3% to 2.9% for 2026 due to the White House's tariff policy. China's economy is expected to slow to 4% this year and next, down by 0.6 and 0.5 percentage points from previous estimates. The U.S. will fall short by 0.9 and 0.7 percentage points, with GDP projected to grow by 1.8% and 1.7%, respectively. These are the consequences of a trade war between global heavyweights—and that's not even factoring in Washington's tariff hikes to 145% and Beijing's to 125%.

Import Tariff Trends

This image is no longer relevant

Investors are beginning to realize that the U.S., where exports account for only 11% of GDP, may suffer less than Germany and the eurozone, where export shares hover around 40%. However, this fact alone is insufficient to halt the ongoing capital flight from North America to Europe.

For a long time, U.S.-issued securities were the default investment choice. American exceptionalism attracted foreign buyers and strengthened the dollar, causing U.S. equity valuations to become significantly inflated. The growing distrust in the White House's policies has pushed foreign investors to flee the U.S. like rats from a sinking ship.

Valuation Trends: U.S. vs European Stock Indices

This image is no longer relevant

The dollar and U.S. Treasuries are no longer the safe-haven assets they were for decades. Investors have found alternatives in gold, the Japanese yen, the Swiss franc, and German government bonds. This shift is one of the key drivers behind the 7% decline in the USD index since the start of the year. How long could this trend last?

This image is no longer relevant

In my opinion, Trump's policy is fundamentally flawed. In trying to reduce the U.S. current account deficit, he is cutting off the export revenues of other countries—revenues that were historically reinvested into the U.S. via securities purchases. As a result, foreign investors have accumulated $19 trillion in U.S. equities and $7 trillion in Treasuries. They also hold 20–30% of the U.S. corporate bond market. These assets are now being dumped, fueling the upward trend in EUR/USD.

Technically, the daily chart of the EUR/USD pair shows a pullback as speculators take profit on long positions. A rebound from support levels at the pivot point (1.1425) and fair value (1.1380) should be seen as an opportunity to build new long positions on EUR/USD.

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 Yen Has Lost Its Bullish Momentum

The Consumer Price Index (CPI) in the Tokyo region declined in June from 3.4% to 3.1% year-over-year, marking the first signal so far that may indicate a slowdown in price

Kuvat Raharjo 12:21 2025-06-27 UTC+2

EUR/JPY. Analysis and Forecast

The EUR/JPY pair is regaining positive momentum during today's trading session, reversing its recent decline.The euro continues to benefit from the prevailing sentiment of selling the U.S. dollar

Irina Yanina 12:17 2025-06-27 UTC+2

Inflation in Canada Remains Too High – USD/CAD May Accelerate Its Decline

Inflation in Canada remains too high to expect a rate cut by the Bank of Canada at its upcoming meeting. In April, inflation sharply slowed to 1.7% y/y, and most

Kuvat Raharjo 11:16 2025-06-27 UTC+2

XAU/USD. Analysis and Forecast

Gold is drawing renewed selling interest today after breaking below the key $3300 level. Traders are awaiting the release of the U.S. Personal Consumption Expenditures (PCE) Price Index, which

Irina Yanina 10:47 2025-06-27 UTC+2

PCE Index Data Unlikely to Significantly Impact Market Dynamics (Potential for Renewed Growth in EUR/USD and Bitcoin)

The easing of tensions in the markets, following a pause in the military conflict in the Middle East, supports the return of the previous paradigm—an increase in demand for stocks

Pati Gani 09:52 2025-06-27 UTC+2

The Market Is Off the Leash

Greed has returned to the markets. While professionals warn about the need for caution amid geopolitical uncertainty, trade wars, and the state of the U.S. economy, retail investors are once

Marek Petkovich 09:16 2025-06-27 UTC+2

What to Pay Attention to on June 27? A Breakdown of Fundamental Events for Beginners

There are relatively few macroeconomic reports scheduled for Friday. Some experts refer to the PCE indicator as "important" and "the Fed's favorite," but we do not share that view

Paolo Greco 07:02 2025-06-27 UTC+2

GBP/USD Overview – June 27: History Doesn't Repeat Itself

The GBP/USD currency pair continued its strong upward movement throughout Thursday. Since the beginning of the week, the U.S. dollar has lost "only" 330 pips. As we've previously stated

Paolo Greco 03:41 2025-06-27 UTC+2

EUR/USD Overview – June 27: Can Trump Balance the Trade Deficit?

The EUR/USD currency pair is in a "free rise" (similar to the term "free fall"). The dollar is once again plunging into the abyss, just as we repeatedly warned. It's

Paolo Greco 03:41 2025-06-27 UTC+2

Powell, Trump, and Everyone Else

What will change with the arrival of a new Federal Reserve Chair? This is a rather important question, and the answer to it may already have implications for the U.S

Chin Zhao 00:08 2025-06-27 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.