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

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

GBP/USD Overview – April 30: The Illusion of U.S. Democracy and Trump's Impeachment

The GBP/USD currency pair saw a slight downward correction after Monday's rise, which came out of nowhere. However, it's difficult to call this minor move a "dollar recovery." The U.S

Paolo Greco 03:29 2025-04-30 UTC+2

EUR/USD Overview – April 30: The Main Mystery of 2025 Revealed

The EUR/USD currency pair continued trading within a narrow range on Tuesday, showing relatively low volatility. In reality, 80 pips per day is not a bad volatility level

Paolo Greco 03:29 2025-04-30 UTC+2

NZD/USD: Bullish Prospects Amid Uncertainty

Although the past week was completely uninformative regarding fundamental indicators, it allowed adjustments to forecasts on economic growth, inflation, and the Reserve Bank of New Zealand's policy strategy based

Kuvat Raharjo 00:43 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.