The euro fell to 1.05 towards the greenback on Thursday, hitting a recent 13-month low as President-elect Donald Trump’s commerce insurance policies and tax cuts are anticipated to strengthen the buck. Analysts warn of additional euro weak spot, probably falling even under parity.
The euro plunged to $1.05 towards the greenback on Thursday, its lowest degree since October 2023 and its fifth straight session of losses, as expectations mount for a stronger greenback underneath Donald Trump’s new administration.
With the Republican celebration now securing the management of each the Home of Representatives and the Senate, Trump’s second time period comes with the facility to implement aggressive financial insurance policies, which may have important penalties for international foreign money markets.
Trump has proposed slapping a 60% tariff enhance on Chinese language imports and a 10-20% tariff hike on imports from different nations, a method that may hit European exporters exhausting, particularly these in equipment and prescribed drugs.
Moreover, Trump’s ambitions to chop the company tax fee to fifteen% may enhance US enterprise competitiveness, doubtless intensifying greenback power.
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 help because the greenback stress intensified.
Analysts warn of euro weak spot as greenback ‘continues to hammer the market’
The most recent Financial institution of America World Fund Supervisor Survey underscored a major sentiment shift amongst traders following Trump’s election victory, with 45% of respondents now choosing the greenback as their top-performing foreign money 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 increase the price of US imports, decrease the price of doing enterprise domestically, and weigh on international exercise ranges. We consider 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 state of affairs not seen in additional than twenty years.
BBVA’s chief strategist Alejandro Cuadrado highlighted the chance for Europe’s largest economic system, noting: “Potential new US tariffs are a priority, and Germany could be one of many nations most affected.”
He added that with eurozone inflation underneath management, the European Central Financial institution (ECB) might really feel little stress to intervene to help 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 help would open a broader bearish entrance that might favour a collapse towards 1.0440.”
Additional downward stress 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 menace of tariffs, leaves the euro weak.”
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 celebration.
Pesole identified that Republican Senate chief John Thune, a free commerce advocate, might push again towards 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.