Euro Bulls Bet on ECB Tightening Cycle as USD Pressured by US Debt Buyback Expectations

English summary

The Euro appreciated against the USD as markets anticipated the ECB raising deposit rates from 2.25% to 2.5%. Despite macro conditions like rising oil prices that should support the dollar, the USD Index remained weak due to investor fears that the US Treasury would expand long-term debt buybacks (Morgan Stanley predicts up to $10 billion), leading to lower US yields. Market focus has shifted to the ECB's terminal rate and policy path, with diverging expectations increasing currency volatility.