The euro-U.S. dollar (EUR/USD) pair has seen remarkable performance, surpassing bitcoin, both gaining over 13% year-to-date. As U.S. fiscal concerns rise and ECB rate cuts approach an end, Germany's new fiscal plan with significant infrastructure spending is shifting focus from U.S. to European assets. Marc Ostwald, ADM's chief economist, anticipates potential resistance for EUR/USD around 1.22/1.23, driven by Germany's plan seen as growth-positive. The narrative of dollar exceptionalism is being challenged, as negative budget deficit projections raise fears. Additionally, a rising U.S.-German yield differential is putting the euro back in the spotlight. Market participants expect that while the ECB may be nearing the end of rate cuts, the Fed could cut rates over the coming year. This potential shift may trigger increased FX hedging among European investors, thereby supporting the euro against the dollar. Overall, as the macroeconomic landscape evolves, EUR/USD is likely to remain buoyant amid U.S. growth uncertainties and ongoing hedging dynamics.

Source đź”—