empty
14.03.2025 12:45 AM
Euro Faces a Potential Coup d'Etat

The Green Party responded to Friedrich Merz's call for a coalition between the CDU and the Social Democrats, aimed at abolishing the fiscal brake, with a strong rebuttal: "We don't believe you!" Many believe that the new German Chancellor has the potential to transform the country into a leading force in Europe, which has driven EUR/USD quotes above 1.09. The time for decision-making is approaching.

The debate in the Bundestag has become a preparatory exercise, with the final vote scheduled for March 18. The Alternative for Germany party has labeled Merz's plan a "fiscal coup d'etat" and plans to vote against it. The Greens might provide a glimmer of hope, but their support seems uncertain.

The future of the euro is precarious, as many positive factors have already been factored into EUR/USD quotes. The main currency pair has risen on expectations, but if Friedrich Merz's efforts fail, a rapid and painful decline could ensue.

This decline might be mitigated by the weakness of the U.S. dollar. Following the consumer price data, the USD index has taken a hit from producer prices. In February, the Producer Price Index (PPI) stagnated, and excluding food and energy, the indicator contracted for the first time since July. The trend of disinflation continues, prompting the Federal Reserve to consider when to resume lowering the federal funds rate.

Dynamics of the U.S. Producer Price Index

This image is no longer relevant

As concerns about a recession grow—potentially a result of the White House's aggressive protectionist policies—loosening monetary policy could be just what the U.S. economy needs. However, this approach may also lead to a decline in the value of the U.S. dollar. It remains uncertain who will suffer more from the trade war.

In response to retaliation from the European Union, Donald Trump has threatened to increase tariffs on imports of French and European wines to 200%, unless Brussels reverses its decision on tariffs. This scenario seems familiar; during a Republican president's first term, tariffs were first raised by the U.S. and then reciprocated by China. Ultimately, China faced significant losses, and the same fate may await Europe.

This image is no longer relevant

One issue is that European exports to North America far exceed the imports in the opposite direction. Therefore, similar to China eight years ago, Europe finds itself in a precarious position. If Friedrich Merz's fiscal stimulus plan is approved by the Bundestag, it may help mitigate the negative impacts of a trade war. However, if this plan does not proceed, the risks associated with buying euros increase. It may be wise to secure profits from previously opened long positions and take a wait-and-see approach as developments unfold in the Bundestag and the White House.

On the daily chart for EUR/USD, there was a formation of an inside bar and a test of the upper boundary of the fair value range. This test ultimately failed, but the bears are eager to make another attempt. If they successfully break the support level at 1.0825, it will provide an opportunity to increase short positions that were established from 1.0875 on the euro against the U.S. dollar.

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

Israeli Missile Strike on Iran Will Crash Global Markets (I Expect Bitcoin and #NDX to Resume Their Decline After a Local Upward Correction)

As I anticipated, the lack of a broad positive outcome in negotiations between China and the U.S. and renewed inflationary pressure led to a sharp decline in demand for corporate

Pati Gani 10:10 2025-06-13 UTC+2

Greed Will Do the Market No Good

The less you know, the better you sleep. Encouraged by a 21% rally in the S&P 500 from its April lows, the crowd continues to buy the dip—completely unbothered

Marek Petkovich 09:35 2025-06-13 UTC+2

What to Pay Attention to on June 13? A Breakdown of Fundamental Events for Beginners

Several macroeconomic reports are scheduled for Friday, but we doubt that the data will significantly impact traders today—especially today. As a reminder, Donald Trump intends to raise tariffs

Paolo Greco 07:16 2025-06-13 UTC+2

GBP/USD Overview – June 13: The Court Won't Stop Donald Trump!

The GBP/USD currency pair continued its upward movement on Thursday and nearly updated its three-year high. For most of the day, quotes hovered around the 1.36 level

Paolo Greco 03:41 2025-06-13 UTC+2

EUR/USD Overview – June 13: America's Economy Gets Lucky

The EUR/USD currency pair continued its strong upward movement throughout Thursday. Is anyone still puzzled as to why the U.S. dollar keeps falling? From our point of view, the reasons

Paolo Greco 03:41 2025-06-13 UTC+2

Trump Sends Out "Letters of Happiness"

It has been less than two weeks since Donald Trump raised import tariffs on steel and aluminum for all countries except the UK. While negotiations with the UK were deemed

Chin Zhao 00:21 2025-06-13 UTC+2

GBP/USD. A Weak Pound Stronger Than a Weak Greenback

Following weak UK labor market data, equally soft figures on British economic growth were released on Thursday. Almost all components of the report came out in the "red zone," increasing

Irina Manzenko 00:20 2025-06-13 UTC+2

The Dollar Flees the Battlefield

The old becomes new again. The word "recession" again trended in the Forex and other financial markets. May's U.S. Consumer Price Index (CPI) fell short of Bloomberg analysts' forecasts. Following

Marek Petkovich 00:20 2025-06-13 UTC+2

Market sells facts

Markets rise on rumors and fall on facts. For a long time, the S&P 500 had been rising due to investors' confidence in a US-China trade agreement. Once the deal

Marek Petkovich 16:53 2025-06-12 UTC+2

The Fed Is Right—It's Too Early to Cut Rates (I Expect a Decline in #SPX and an Increase in Gold Prices)

The fresh U.S. Consumer Price Index (CPI) data released on Wednesday, although below the consensus forecast, confirmed the persistence of inflationary pressure. This fully justifies the Federal Reserve's reluctance

Pati Gani 10:37 2025-06-12 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.