The euro fell to 1.05 in opposition to the greenback on Thursday, hitting a contemporary 13-month low as President-elect Donald Trump’s commerce insurance policies and tax cuts are anticipated to strengthen the dollar. Analysts warn of additional euro weak point, doubtlessly falling even under parity.
The euro plunged to $1.05 in opposition to the greenback on Thursday, its lowest stage since October 2023 and its fifth straight session of losses, as expectations mount for a stronger greenback beneath Donald Trump’s new administration.
With the Republican social gathering now securing the management of each the Home of Representatives and the Senate, Trump’s second time period comes with the ability to implement aggressive financial insurance policies, which may have vital penalties for international forex markets.
Trump has proposed slapping a 60% tariff improve on Chinese language imports and a 10-20% tariff hike on imports from different international locations, a technique that may hit European exporters laborious, particularly these in equipment and prescription drugs.
Moreover, Trump’s ambitions to chop the company tax price to fifteen% may increase US enterprise competitiveness, doubtless intensifying greenback energy.
Eurostat confirmed on Thursday that eurozone GDP grew by 0.4% within the third quarter in comparison with the earlier quarter, whereas employment ticked up by 0.2%, upwardly revised from 0.1%. Regardless of these figures, the euro discovered little assist because the greenback strain intensified.
Analysts warn of euro weak point as greenback ‘continues to hammer the market’
The most recent Financial institution of America World Fund Supervisor Survey underscored a big sentiment shift amongst buyers following Trump’s election victory, with 45% of respondents now choosing the greenback as their top-performing forex for 2025, up sharply from 20% in October.
Goldman Sachs economists lowered their progress forecasts for the eurozone, citing considerations over heightened uncertainty and trade-related spillovers from Trump’s insurance policies. “The coverage proposals on supply would elevate the price of US imports, decrease the price of doing enterprise domestically, and weigh on international exercise ranges. We imagine it will have direct and highly effective implications for the greenback on a broad foundation,” analysts at Goldman Sachs remarked.
Goldman even indicated that, if US tariffs and tax cuts proceed as deliberate, the euro may fall under parity with the greenback – a situation not seen in additional than twenty years.
BBVA’s chief strategist Alejandro Cuadrado highlighted the danger for Europe’s largest economic system, noting: “Potential new US tariffs are a priority, and Germany can be one of many international locations most affected.”
He added that with eurozone inflation beneath management, the European Central Financial institution (ECB) could really feel little strain to intervene to assist the euro.
Intesa Sanpaolo market strategist Luca Cigognini warned: “The greenback continues to hammer the market, crushing all main currencies to the draw back. EUR sees the spectre of 1.0500 approaching. The eventual break of this psychological assist would open a broader bearish entrance that might favour a collapse towards 1.0440.”
Additional downward strain on euro doubtless
Saxo Financial institution’s chief funding strategist, Charu Chanana, sees additional draw back for the euro, saying: “The USD nonetheless has room to run. Political instability in Europe, mixed with an already fragile financial restoration and the looming risk of tariffs, leaves the euro susceptible.”
A extra cautious outlook on the euro got here from ING foreign exchange analyst Francesco Pesole, who famous that Trump’s insurance policies may face obstacles inside his personal social gathering.
Pesole identified that Republican Senate chief John Thune, a free commerce advocate, could push again in opposition to a few of Trump’s aggressive tariff plans.
He additionally highlighted draw back dangers for the greenback, citing stretched lengthy positions and potential dovish remarks from upcoming speech by Federal Reserve Chair Jerome Powell in Dallas in a while Thursday.
