FX Daily: Trive Bearish on EUR/USD
A second Trump term may strengthen the USD and weaken the EUR, especially with a Republican Congress. Proposed tariffs, supply chain restrictions, and potential tax cuts would drive dollar gains and boost U.S. inflation, while pressuring EUR/USD toward parity by 2025. This scenario could force the ECB to cut rates to support eurozone growth.
EUR: Trump elected, more aggressive cut from ECB?
Trump's trade agenda to "level the playing field" poses significant challenges for the open economies of continental Europe. In a potential second term, Trump is expected to broaden his trade war beyond China, targeting other regions at a time when eurozone growth is stagnant, and key economies like Germany are reassessing their future business models. The eurozone’s reliance on export-led recovery is no longer a viable option.
A Trump victory could weigh heavily on EUR/USD, especially if Republicans secure a “red sweep” by winning the House. However, should Republicans fail to capture the House, markets anticipate a challenging scenario for EUR/USD. In this case, renewed trade tensions would unfold without the economic stimulus of extended U.S. tax cuts, potentially pushing EUR/USD below parity by late 2025. This situation could force the European Central Bank into deep rate cuts to stabilize the economy.
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