Investors turn to Europe amid US trade uncertainty

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05-05-2025 12:25

Investors turn to Europe amid US trade uncertainty

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Investors turn to Europe amid US trade uncertainty

The US dollar is once again fighting to maintain its global leadership, but the struggle is becoming increasingly difficult. Despite attempts to stay afloat, the greenback continues to lose ground against the euro, which has seen a resurgence in recent weeks. Analysts point to the unpredictable policies of President Donald Trump as a key factor behind the dollar’s decline, while the euro has seized the opportunity to attract investor interest.

According to market assessments, during the first 100 days of Trump’s second term, from January 20 to April 25, 2025, the US dollar index (DXY) dropped nearly 9%, marking its worst performance in half a century.

The disruption of global trade structures under the Trump administration has cast doubt on the dollar’s role as a safe-haven asset. In contrast, the euro has emerged as a promising alternative, capitalizing on the uncertainty. Still, some experts warn against premature celebration, noting that conditions could shift quickly.

Nevertheless, many analysts remain skeptical about a swift resolution to the volatility triggered by Washington’s trade policies. European leaders and EU officials have capitalized on the situation, identifying the chaos as an opening to attract capital into European assets from the euro-denominated securities to sovereign bonds.

There are already signs that this strategy is working. Since early April, the euro has gained 5.4% against the dollar, pushing the EUR/USD pair above $1.1300, its highest level since late 2021.

Looking ahead, some forecasts position the euro as one of the top three safe-haven assets favored by global investors, alongside gold and the Swiss franc. Gold recently surged above $3,300 per ounce, while the Swiss franc has strengthened by nearly 7% against the dollar.

Adding to the euro's appeal is Germany’s planned issuance of up to €1 trillion in new sovereign bonds. These securities are now viewed as the safest euro-denominated assets.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.

Forex humour