empty
14.02.2025 12:45 AM
The Euro is Tired of War

If the Federal Reserve can afford to slow down monetary expansion, why shouldn't the European Central Bank do the same? Statements from Bundesbank President Joachim Nagel suggest that, as the ECB approaches a neutral level, it should proceed with caution. Additionally, rumors of negotiations to end the armed conflict in Ukraine have helped the EUR/USD pair withstand strong U.S. inflation data and launch a counteroffensive. However, on its first attempt, the pair failed to make significant upward progress.

ECB Rate Dynamics

This image is no longer relevant

When hostilities broke out in Eastern Europe in February 2022, the euro was trading above $1.14, with expectations of continuing its rally due to recovering domestic demand after the pandemic. However, disruptions in oil and gas supplies from Russia triggered an energy crisis, prompting the EU to increase military spending while cutting back on other budgetary allocations. This led to a capital flight from Europe, causing the EUR/USD exchange rate to fall below parity by autumn 2022.

If a peace agreement is reached between Moscow and Kyiv, we could see a decline in defense expenditures, a drop in energy prices, and reduced geopolitical risks that would restore investor interest in the Eurozone. Recently, a phone conversation between the U.S. and Russian presidents sparked a rally in the euro and other European currencies.

Although this may be just the beginning of a peace negotiation process, the fact that initial steps have been taken is having a positive impact on risk assets and contributing to a weakening of the U.S. dollar, which is traditionally viewed as a safe-haven currency.

However, uncertainty remains. The positions of Moscow and Kyiv are still far apart, and Donald Trump's unpredictability means he could potentially derail the process at any moment. As a result, the upward movement of EUR/USD is unlikely to be linear. Many obstacles still lie ahead for the bulls, with significant challenges including U.S. protectionist policies and forecasts from the futures market that predict only one Fed rate cut in 2025. Notably, the December FOMC projections included expectations for two acts of monetary easing.

Market Rate Forecasts for the Fed

This image is no longer relevant

This image is no longer relevant

There is still considerable uncertainty surrounding Donald Trump's tariff policies. If the U.S. president chooses to implement reciprocal tariffs instead of universal ones, trade partners may reduce entry barriers for American goods. This could potentially accelerate international trade rather than slowing it down, benefiting the global economy and pro-cyclical currencies like the euro. Given the various possible scenarios, the EUR/USD pair is likely to remain in a medium-term consolidation until more clarity emerges.

From a technical perspective, the daily EUR/USD chart indicates that bullish traders attempted to activate a minor 1-2-3 pattern to extend the correction. The first attempt to break resistance at 1.0435 was unsuccessful; however, a successful second attempt could present long opportunities. Conversely, if the price drops below the pivot level of 1.0355, it would signal a return to short positions.

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 Watch on May 1? A Breakdown of Fundamental Events for Beginners

There are relatively few macroeconomic events scheduled for Thursday, but that no longer matters much. Yesterday, there were plenty of important publications from the Eurozone, Germany, and the U.S. Even

Paolo Greco 06:50 2025-05-01 UTC+2

GBP/USD Overview on May 1, 2025

The GBP/USD currency pair continued its slight decline on Wednesday. The U.S. currency lost nearly 150 points on Monday without any visible reason. Therefore, the 80-point rise over Tuesday

Paolo Greco 06:34 2025-05-01 UTC+2

EUR/USD Overview on May 1, 2025

The EUR/USD currency pair continued trading within the same sideways channel of 1.1321–1.1426 on Wednesday, clearly visible on the hourly time frame. Despite a massive amount of macroeconomic data from

Paolo Greco 06:30 2025-05-01 UTC+2

100 Days of Trump's Presidency

While the dollar prepares for key economic data that could determine the Federal Reserve's next course of action, Donald Trump reflected on his first 100 days as President

Jakub Novak 13:31 2025-04-30 UTC+2

USD/CAD: The Pair Consolidates Under Pressure

USD/CAD is showing sideways movement, with spot prices currently trading around the 1.3840 level. The decline in crude oil prices to a three-week low, amid concerns that a full-scale trade

Irina Yanina 13:26 2025-04-30 UTC+2

Canadian Dollar Preparing for a Breakout

Retail sales in Canada fell by 0.4% month-over-month in February but rebounded in March with a strong increase of 0.7%. On a year-over-year basis, retail sales declined to 4.7%

Kuvat Raharjo 13:09 2025-04-30 UTC+2

Stable Inflation to Support the Australian Dollar

Inflation in Australia remained steady at 2.4% year-over-year in Q1, defying expectations of a slight slowdown to 2.2%. The quarterly increase of 0.9% also exceeded forecasts, while core inflation slowed

Kuvat Raharjo 13:03 2025-04-30 UTC+2

U.S. GDP and PCE Data Unlikely to Drastically Shift Market Conditions (Possible Resumption of #NDX and #SPX Growth)

Markets are already fatigued by the chaos unfolding in Donald Trump's mind and among his followers. Everything remains extremely unclear, so market participants are now fully focused on today's important

Pati Gani 09:48 2025-04-30 UTC+2

The Market Hears What It Wants to Hear

How far will greed carry the crowd? The late April rally in the S&P 500 somewhat sweetened the bitter pill for Donald Trump. His first 100 days in office have

Marek Petkovich 09:23 2025-04-30 UTC+2

What to Pay Attention to on April 30? A Breakdown of Fundamental Events for Beginners

A considerable number of macroeconomic events are scheduled for Wednesday, but we doubt they will have any meaningful impact on currency pair movements. The market continues to ignore most macroeconomic

Paolo Greco 06:28 2025-04-30 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.