Euro Stability Defies Trump Tariff Threats as Capital Flows Anchor Markets
The euro demonstrated resilience against geopolitical tensions this week, with analysts attributing its stability to deep-seated capital flows rather than political rhetoric. Europe's $8 trillion holdings in U.S. securities—nearly double the rest of the world's combined exposure—acted as a counterweight to tariff-related volatility.
Deutsche Bank's George Saravelos highlighted the fragility of Western financial alliances in a client note, noting European lenders' outsized role in funding U.S. markets. "When the geoeconomic stability of the Western Alliance faces existential disruption," he wrote, "European capital flows become the critical shock absorber."
Market attention now turns to potential EU activation of its anti-coercion instrument, with French President Emmanuel Macron reportedly spearheading the initiative. This financial deterrence mechanism could further insulate European assets from political crosswinds.
