The euro risks falling to parity with the US dollar for the first time since late 2022, as a potential new transatlantic trade war could further strain the eurozone economy, already grappling with declining private sector output as indicated by recent purchasing managers surveys.
Deutsche Bank analyst George Saravelos highlighted that only 30% of the potential impact of Trump's proposed economic policies has been factored into financial markets, indicating significant potential for euro sell-off if new tariffs are implemented.
Recent PMI data showing eurozone business activity contraction has triggered expectations of substantial interest rate cuts in the eurozone, with a near 50% chance predicted for a 50-basis point reduction at the upcoming ECB meeting.
Trump's administration may introduce tariffs and economic policies that could heavily impact European exports to the US, making them less competitive and further jeopardizing eurozone economic growth.
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