The euro falls again against the US dollar and loses the reference of the 1.05 dollars to the exchange rate. With this Thursday’s fall, the common currency in the eurozone reaches intraday prices not seen since December 2022 in an environment in which the war in Ukraine raises tension more in the Old Continent than in the United States. Furthermore, the expected slowdown in interest rate cuts by the Federal Reserve strengthens the dollar again with a Donald Trump who will bring a more inflationary policy to the world.
Several factors have gone against the euro in the final stretch of the year. And, after seeing a crosses above $1.11the currency under the tutelage of the European Central Bank has encountered obstacle after obstacle that has led the euro to lose more than 5% since 2024 began. The last reason that the euro found to increase its weakness has been geopolitics.
Since Vladimir Putin authorized the use of nuclear weapons in the face of an attack on Russian territory with long-range Western weapons, the war in Ukraine regained its prominence in the face of the conflict in the Middle East and the dollar has prevailed as safe haven value not only against the eurobut before the major currencies of the world used as reserves by central banks.
The market is pricing in that the US Federal Reserve will not make any further interest rate cuts in 2024, according to OIS financial assets (overhead indexed swaps) while the European Central Bank will maintain its course unchanged. This would mean seeing a 25 basis point downward adjustment in December and at least another 100 basis points of cuts over the next year. This will widen the differential between both central banks and will give the euro greater weakness in the face of a US economy that will keep its price indices higher than what experts projected at the beginning of November. “Inflation prospects in the US move upwards anticipating a Higher growth and upward pressure on wages and prices as a result of Trump’s economic agenda. Bond yields are rising and the dollar will strengthen against the euro,” Bankinter warned.
The arrival of Donald Trump to the White House It will be linked to inflationary policies, such as the tariffs that are expected to be imposed on Chinese products but foreseeably also on European ones, and also to expansionist measures, such as a generalized reduction in taxes. In fact, there are already those who talk about parity between the euro and the dollaras Amundi recalls, although there would still be a 4.6% drop until we see a change in the currency market from one euro to one dollar. In fact, it was precisely in October 2022 when this parity was last achieved in a context of skyrocketing inflation on both sides of the Atlantic.
However, the euro is not the only one that is affected by the regained strength of the dollar. Other currencies such as the Swiss franc, the pound sterling or the Japanese yen also lost ground against the greenback. The Bloomberg index dollar against the major market currencies rises 6%.
#euro #pressure #losing #trading #lows #December
