July 3, 2025
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A Majoor Currency Outpaces Bitcoin with More Possible Momentum Ahead: Macro Markets

As US Fiscal Fears Mount and Ecb Rate Cuts Near Their End, The European Surpring Rally Is Forcing Global Investors to Reteir Dollar Bets.”, – WRITE: www.coindesk.com

A Majoor Currency Outpaces Bitcoin with More Possible Momentum Ahead: Macro MarketsAs US Fiscal Fears Mount and Ecb Rate Cuts Near Their End, The European Surpring Rally Is Forcing Global Investors to Reteir Dollar Bets.Updated Jul 3, 2025, 4:29 AM Publissed Jul 3, 2025, 4:26 AM

Welcome to Coindesk’s Weekly Macro Column, Whore Analyst Omkar Godbole Writes about his Macro Obervations and Analysis in the Broader Markets. The Views Expressed in this Column Aren’s.

A Majoor Currency Pair, WHICH IS BARELY CONSIDERED VOLATILE, IS NOW RIVALLING Notoriously Explosive Bitcoin’s Price Performance – Unimaginable, Right?

Not anymore.

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In june, EUR/USD, The MOST LIQUID FX Pair in the World, Rose Nearly 4% to 1.1786, OutperForforming Bitcoin’s

2.4% GAIN. REMARKABLY, BOTH Assets Are Nearly Neck and Neck in Year-To-Date Performance, Each Up Over 13%.

Some Observors Believ Eur/USD Still Has Room to Run Higher, A Positive Sign for Eur-Vedgged Stablecoins, WHICH HAVA ALREADY BENEFITED FROM The Single Currency’s Surge.

“EUR/USD COURCE Resistance Probably in The 1.22/1.23 Area,” Marc Ostwald, Chief Economist and Global Strategist at Adm Investor Service International Brake, whoh is Seen As “Growth Positive by MOST PEOPLE.”

German Exceptionalism and US Fiscal ScareThe term US Exceptionalism – the Relative Attractiveness of Dollar Assets, Underpinned by the Fiscal Spending of the Biden Era – Has Historically Helped the GreeBack. However, that Story Is Now Showing Signs of Reversal Under President Donald Trump’s Second Term. Concerns Over Widening Budget Deficits and Soaring Debt-Servicing Costs Have Sparked What Some Describe As A Budding “Fiscal Scare.”

Now, The Exceptionalism Narrative Might Be Shifting to Germany.

That’s Because Early This Year, Germany AnnounCed A Landmark Fiscal Plan Comparing An Examption of Defense SPEENDING (Over 1% of GDP) from the Debt Brake Years, and 100 Billion of Which Will Be ImmediaTely Routed to the Climate Transition Fund.

The Remaining Amount Is for Additional Infrastructure Investments, With 300 Billion Europe for the Federal Government and 100 Billion Europe for State Governments. Lastly, The Plan Will ALLOW STATE GOVERNments to Run Annual deficits of up to 0.35% of GDP.

The Fiscal Package’s Direct Impact on German GDP is Expert to Be Felt From Next Year, and It’s Expectioned to Beyond 2027, With Positive Nenover.

This is now changing the Conversation to European Assets, Racher than us

“The Initial Condition Was A Huge Overweight in USD and Assets, But Now It Looks Like Portfolio Allocation Town European Equitans, with Germany Steping Up Defence and Infras. Chief Market Strategist at Bannockburn Capital Markets, SAID IN A EMAIL.

Policy UncertaintyThe Focus on Growth Potential Explans WHY The US-GERMAN YIELD (RATE) DIFFENTIALTIAL, AS An Indicator of Exchange Rate, Has Fallen to the Back Burner.

The Chart Below Shows that the Historical Positive Correlation Between Eur/USD and The Two-Year German-Bnd Yield Differential Has Broken Down Since Late March.

EUR/USD and TWO-YEAR GERMAN-US YIELD DIFFERENTIAL. (TradingView/Coindesk)EUR/USD and TWO-YEAR GERMAN-US YIELD DIFFERENTIAL. (TradingView/Coindesk)

Moreover, Higher Yields in the US No Longer Represent A Positive Economic Outlook But Are A Network to Fund Deficits.

“The Dollar Can Seem to be Decoupled from Rates, But I Think That Another Way to Frame It Is That Us Needs To Offer A Higher Premium to Compnts for the Policy Unceer. Chandler Noted.

Rate Outlook Favors EurA potential shift in the yeld figrential narrative is putting the Euro back in the SpotLight. Market Participants Are Bracing for A Return to Fundamentals – Particularly Rate Spreads – Yetlook May Not Bode Well for the GreenBack.

“” TO SOME EXTENT The Rate Differential Outlook for Eur/USD Is Not Favourable for the USD, if One Assumes that The Ecb Is Largely Withp Rate Cuts (Perhaps One More), While the Fed Kut The NEXT 12-18 MONHS, IF US GROWTH CONTINUES TO Be Sluggish, “Adm’s Ostwald Said.

The European Central Bank (ECB) Has Delivered Eight Quarter-Point Cuts in A Year, Yet The European Has Rallied Against the US Dollar. From here on, The Focus will be on Potential Federal Reserve Rate Cuts. SO FAR, POWELL HELD RATES STEADY AT 4.25% DesPITE President Trump’s Repeated Calls for Ultra-Low Borrowing Costs.

In Other Words, The Rate Differential Is Likely to Widen in Favor of the Eur.

Need for Higher Fx Hedge RatiosHistorically, The USD has had a Natural Hedge to Foreign Investors in US Stocks.

SO Naturaly, As the Positive Correlation Between US Stocks and The Dollar Has Broken, Europe Pension Funds – Hohich Account for Nearly Half of Foreign Holdings in US EQUITITI Increase their fx Hedging to Protect Portfolio Returns Against Dollar Weakness. Accorness to Market Observers, This FX Hedging Strategy Could Continue to Propel the European Higher in the Near Term.

Dollar Index and The S&P 500. (Tradingview/Coindesk)Dollar Index and The S&P 500. (Tradingview/Coindesk)

Let’s Put the Hedging Strategy in Context. Imagine A European Fund With $ 10,000 WORTH OF INVESTMENTS IN THE US IF The US Dollar (USD) Gets Weaker Compared to the European, The Fund’s Investment Loses Value When.

To Hedge Against this Currency Risk, The Fund Might Consider Hedging Part of of the Investment by Taking Short Bets on the Dollar Via Forwards, Futures or Options, Adering to The Dollar

“Using the MONTHLY DANISH PENSION FLOW DATA As A European Proxy, April Saw A spike Higher in the Fx Hedging Ratio 61% in January to 74% in Apr. Higher and Also More Consistent FX Hedging for All European Investors, that Will Naturally See Eur Selloffs on Newsflow Faded On a Day-to-Day Basis Until that Flow Peaks. We’re not there Yet, But We’re A Lot Closer, “Jordan Rochester, Head of Ficc Strategy at Mizhou, Recently Explained in A Linkedin Post.

According to Financial Analyst Enric A., FEWER THAN 20% OF European Institutions Currently Hedge Their USD Exposure, and They Will Have to Do Stabilize PortfoliS Momentum.

“Higher Hedge Ratios = More Eur Buying, More USD Selling,” Enric Said On LinkedIn.

And to Top It Off, Hedging by Other Regions’ Funds May Have the Same Effect. CHANDLER CITED BIS DATA While Highlighting Hedging by Asian Funds.

Bottom Line: As Macro Narratives Shift Town Potential US Fed EASING AND HEDGING DYNAMICS Exert Pressure on the Greenback, EUR/USD MAY REMINAINAANT DESPITE EUROZONE GROWH HEADTH HEADTH HEADTH HEADTH HEADTE.

Read More: Is It Time to Reduce, Hedge, and Diversify USD Exposure?

Omkar Godbole

Omkar Godbole is a co-managing Editor on Coindesk’s Markets Team Based in Mumbai, Holds A Masters Degree in Finance and A Charted Market Technician (CMT) Member. Omkar Previoously Worked at FxStreet, Writing Research on Currency Markets and As Fundamental Analyst at Currency and Commodities Desk at Mumbai-Based Brokerage Houses. OMKAR HOLDS SMALL AMUNTS OF BITCOIN, Ether, Bittorrent, Tron and Dot.

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