Investing.com — The economy has been struggling lately as political uncertainty in Europe beckons again, but events across the ocean in the US could have even more impact, potentially pushing the euro towards parity against the dollar could be pushed down if the Trump White House were to pursue aggressive protectionist measures. trade policy.
“We see the EUR/USD (and many other dollar pairs) remaining weak below 1.10 for the next two years,” Deutsche Bank said in a note according to Forexlive, predicting that the EUR/USD will strengthen by the end of this year will drop to $1.05. .
The euro is under pressure as political uncertainty once again roils the continent following a surprise, snap election in France that could leave the country with a far-left or far-right government, or a hung parliament, not only making things difficult to govern, but is also likely to have an impact on Europe’s overall competitiveness.
“The main negative impact is on Europe’s long-term competitiveness and strategic autonomy, regardless of who wins,” Deutsche Bank added.
But a downside forecast for EUR/USD to parity may still be in the offing, the bank says, flagging the “US elections and the extent to which aggressive protectionist trade policies are being pursued” as a potential negative catalyst for the euro.
Former President Donald Trump has vowed to step up his trade war by proposing “universal base tariffs on most foreign products” and floated the idea of tariffs on most imports.
If Trump can claim victory in the upcoming presidential race, it would likely be the final nail in the coffin pushing the euro toward parity against the dollar.
“If this is the case, we will likely revise our EUR/USD forecast closer to parity,” the bank added.
