Central Banks Divest US Dollar. Forecast as of 17.06.2025
Foreign central banks are reducing their holdings of US Treasuries. Additionally, counterparties are increasingly opting to abandon the US dollar in international settlements. Let’s discuss these topics and make a trading plan for the EURUSD pair.
The article covers the following subjects:
Major Takeaways
- Foreign central banks are selling US Treasuries.
- The share of the US dollar in global settlements is declining.
- The eurozone economy is experiencing challenges.
- Trades on the EUR/USD pair can be considered on false breakouts within the 1.149–1.161 range.
Weekly US Dollar Fundamental Forecast
The rally in US stocks following reports of Iran’s readiness to engage in negotiations has led to a decline in the EURUSD pair, affecting the bullish sentiment. An improvement in global risk appetite has bolstered the US dollar; however, investors and institutions are beginning to distance themselves from US assets and securities.
Bank of America reported that non-residents had been selling their US Treasury bond holdings since March. In the week ending June 11, the holdings of US Treasuries by foreign central banks decreased by $17 billion. Since the beginning of spring, they have fallen by $48 billion. Since March, foreign assets held in repo transactions with the Fed have also been melting away by $15 billion. At first glance, this trend appears unusual. In previous years, the depreciation of the US dollar, on the contrary, increased non-residents’ demand for US assets.
Non-Resident Holdings of US Treasuries and US Dollar Performance
Source: Bloomberg.
In 2025, the economic landscape underwent significant changes due to Donald Trump’s unconventional policies. His intention to reshape the international trading system resulted in the loss of American exceptionalism, and the greenback lost its status as the primary safe-haven asset.
Furthermore, the US dollar’s excessive volatility is becoming an additional reason for avoiding it in international settlements. While the USD index experienced a 7% increase in the fourth quarter, it subsequently lost more than 8% in the first quarter. Counterparties are increasingly opting for currencies such as the euro, the Chinese yuan, the Canadian dollar, and the Mexican peso.
Composition of Global Export Invoicing
Source: Bloomberg.
Investors, central banks, and international trade are continuing to divest from all American assets, allowing even a vulnerable currency like the euro to gain ground. In April, with the introduction of tariffs by the US administration, the frontal loading of European supplies to the US came to an end. This development had a negative impact on the eurozone’s foreign trade. The value of EU exports to the US decreased from €71.5 billion to €47.6 billion. The sharp decline in international demand has led to significant factory closures. Industrial production in the currency bloc fell by 2.4%, marking the fastest pace in over two years.
At the same time, Bloomberg experts revised their GDP growth forecast for Germany for 2025, increasing it from stagnation to 0.2%. In 2026 and 2027, the economy is projected to accelerate to 1.1% and 1.7%, respectively, driven by fiscal stimulus measures.
German GDP Forecasts
Source: Bloomberg.
Markets are expanding in line with evolving expectations. Thus, confidence in a prosperous future for the eurozone’s powerhouse is boosting the EURUSD pair.
Weekly EURUSD Trading Plan
Investors are not rushing to make any sudden moves in anticipation of the Fed’s meeting. However, markets are bracing for a hawkish surprise. If it is absent, the euro will likely experience a period of stability, which will allow the EURUSD pair to continue its upward trend. The previously announced strategy, which involved false breakouts of the 1.1490–1.161 trading range, is currently viable.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
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