COMMENT-EUR/USD may be trapped on no-man's ground all year

March 5 (Reuters) - EUR/USD may be trapped on no-man's ground all year between the opposing forces of German and U.S. policies that have conspired to drive the pair back toward the centre of a range that held throughout 2023 and 2024.

Where the Trump trade drove a speedy drop in the euro from 1.1214 to 1.0125, plans to loosen Germany's debt brake have helped fuel a rapid rise to 1.0722.

The centre of the prior range, which was effectively 1.0500-1.1000, is nearby and the precise centre of the widest points (1.1276-1.0448) traded during two very quiet prior years is 1.0862.

While this may allow for a slightly bigger rise, it's not much, and it is likely wise not to place too much faith in the longevity of a rally that is currently based on the potential for borrowing to boost growth. Higher debt could have seriously negative consequences for the euro. Debt was the basis of the eurozone crisis that might have killed it.

Similarly the surge in demand for dollars surrounding Trump's return to power has been short-lived. Concerns about the damaging consequences of a trade war have since fuelled expectations for lower interest rates and lessened the likely change in yield differentials that previously weighed on EUR/USD.

While changes in U.S. and eurozone interest rates may be smaller then previously perceived, the 2.5% gap looks set hold until December which is a big factor limiting potential for EUR/USD to rise further. It should encourage sellers if EUR/USD rises above the exact centre of the range.

Ranges in 2023 and 2024 were among the smallest on record and future ranges may be similar.