Forex analytics. The euro has turned onto a dangerous path
A bad example is contagious. Donald Trump’s attacks on the Fed have set a precedent for the loss of the central bank’s independence. And if Sanae Takaichi and the Bank of Japan have found a common language, then the French right, if it wins the presidential election in 2027, will jeopardize the independence of the ECB. In this regard, the early resignation of Christine Lagarde is more likely to benefit the euro, although rumors about this laid the foundation for the peak of the EURUSD.
According to an insider in the Financial Times, Christine Lagarde intends to leave office earlier than the deadline in order to help Emmanuel Macron and Friedrich Merz appoint a new head before the French presidential elections. The ratings of the National Rally are high. If Donald Trump demands a rate cut from the Fed, then the right–wingers from the ECB demand purchases of distressed French bonds. Their puppet will threaten the independence of the central bank, which will undermine the credibility of the euro.
In fact, one is not a warrior in the field. As the example of the United States shows, it takes much more than one person at the helm to control the executive branch of the central bank. Even if Congress approves Kevin Warsh as Fed chairman, an army of hawks is growing inside the FOMC.
According to the January minutes of the Committee’s meeting, several members demanded bilateral formulations on inflation. If it doesn’t want to slow down, the Fed should consider raising the federal funds rate. Such rhetoric has become a revelation for investors. Coupled with the reluctance of orders for durable goods to fall as deeply as Bloomberg experts expected, it allowed the “bears” on the EURUSD to develop an attack.
Moreover, the US dollar does not seem to be afraid of the “sell America” strategy. In 2025, non-residents increased purchases of U.S. securities from $1.18 trillion to $1.55 trillion. Of these, $658.5 billion was related to stocks, $442.7 billion to Treasury bills and bonds.
Some of these flows were hedged by selling greenbacks, which formed the basis for the decline in the USD index in 2025. According to JP Morgan, foreign investors will increase the volume of currency risk insurance. However, why would they do this if the risks of the Fed losing its independence are not as great as rumor has it? At the same time, the long pause of the Federal Reserve in the cycle of monetary expansion plays into the hands of the “bears” on the EURUSD.
Donald Trump will probably have to sue the second Fed chairman in a row. The president jokingly stated this if Kevin Warsh does not lower rates. As you know, there is a joke in every joke.
