Euro Hits 13-Month Low
On Thursday, the euro dropped to $1.05 against the dollar, marking its lowest value in over a year. This decline represents the euro’s fifth consecutive day of losses, largely driven by expectations of a more robust dollar under President-elect Donald Trump. Analysts predict that the euro may experience further weakness, possibly even falling below parity with the dollar.
Trump’s Economic Agenda Pressures the Euro
With the Republican party now holding control of both Congress chambers, Trump’s upcoming administration has the potential to enact bold economic policies that could reshape global currency dynamics. Trump aims to implement substantial tariff increases—60% on Chinese imports and 10-20% on goods from other nations—posing significant challenges for European exporters, particularly in sectors like machinery and pharmaceuticals. His plan to reduce the corporate tax rate to 15% further intensifies expectations of a strengthened dollar.
Economic Indicators Show Mixed Results
Despite Eurostat reporting a 0.4% GDP growth in the eurozone for the third quarter, along with a small increase in employment, the euro struggled to find support against the surging dollar. Investors remain focused on the implications of Trump’s trade policies, which many believe could lower foreign activity levels while enhancing domestic business competitiveness.
Analyst Opinions Reflect Growing Concern
Recent sentiment shifts indicated in the Bank of America Global Fund Manager Survey show that interest in the dollar has dramatically risen, with 45% of participants considering it the top-performing currency for 2025. Goldman Sachs downgraded their growth forecasts for the eurozone, cautioning that Trump’s anticipated policies would negatively impact trade and lead to a stronger dollar. They warned that if tariffs and tax cuts are enacted, the euro could dip below parity— a scenario not witnessed in over twenty years.
Future Outlook for the Euro
Looking ahead, analysts express concern about the euro’s stability. According to Saxo Bank’s chief investment strategist, Charu Chanana, ongoing political instability in Europe, combined with a fragile economic recovery, leaves the euro exposed to further declines. While some analysts, like ING’s Francesco Pesole, suggest that there could be internal resistance to Trump’s tariffs from elements within his own party, the immediate outlook remains grim for the euro amid potentially stronger dollar momentum.
SOURCE: Ref Image from Euronews
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