EUR/USD rose to 1.0480, an increase of 0.18%, following Germany’s conservative election victory. The Christian Democratic Union (CDU) and its allied Christian Social Union (CSU) obtained 28.5% of the vote, with the Alternative for Germany (AfD) at 20%.
Weaker US PMI data contributed to the dollar’s decline. The S&P Global Composite PMI dropped to 50.4 in February, while the Services PMI decreased to 49.7, indicating a slowdown in the sector. Concerns about the US economy and new tariff threats may further impact the dollar’s strength, affecting the EUR/USD pair.
This bump in the euro follows the outcome of Germany’s latest election, where Friedrich Merz’s conservative bloc, consisting of the CDU and CSU, secured a solid share of the vote. At the same time, the far-right AfD gained further traction, creating potential challenges for forming a stable coalition in Germany. Political shifts in Europe often drive the euro’s movement, and traders who track currency pairs will be watching how coalition discussions unfold in Berlin. If uncertainty grows, the euro’s resilience might be short-lived.
Meanwhile, the US dollar is facing its own challenges. The latest PMI figures from the United States painted a weaker picture of economic activity. The S&P Global Composite PMI’s dip reflects slowing business conditions, but what stands out more is the Services PMI slipping below the 50 mark. A reading under 50 usually signals contraction, and since the services sector is a major part of the US economy, any extended weakness here could weigh on the dollar further.
At the same time, Washington is ramping up trade tensions with fresh tariff threats. If these turn into concrete actions, markets may start pricing in potential disruptions. Historically, the US dollar has seen mixed reactions to trade disputes—at times benefiting from risk aversion, while in other cases losing ground on fears of slower global trade.
For those trading in derivatives, all these elements create clear opportunities and risks. The euro’s recent bounce may not have firm footing if German political uncertainty drags on. On the other side, the dollar faces downward pressure from disappointing PMI readings and looming trade policy moves.
It will be important to track political negotiations in Germany and any updates on US economic momentum. If future data confirms further slowing in the American economy, expectations around Federal Reserve policy may shift again, pushing traders to reassess their positions. Any fresh comments from the ECB or Fed will add to the short-term volatility, especially if policymakers provide clues about potential rate adjustments.
