Investing.com – JPMorgan has turned even more bearish on the euro in the wake of the US presidential election, predicting a parity test for the first quarter of 2025.
At 09:15 ET (13:15 GMT), EUR/USD was trading down 0.8% at $1.0499, up to start the new week after falling almost 3% over the past month.
The year 2024 was another year of disappointment in eurozone growth versus the US, JPMorgan analysts said in a Nov. 22 note.
“Softer than expected growth in the Eurozone is not a new phenomenon, but instead a trend that has been intact for seven consecutive years, a theme that FX investors are seemingly bored with, but frustratingly continues to manifest itself in price action,” said the bank.
Unlike 2023, EUR/USD performance in 2024 was entirely determined by interest rate differentials and other factors that became less relevant.
The 2025 EUR/USD forecast expects a parity test in the first quarter as rate risks are more fully priced in, with a recovery to $1.08 later in 2025 due to potential mitigating factors and the depletion of US resilience.
The bearish short-term EUR/USD forecast aligns with our previously published roadmap for the US elections in a ‘Red sweep’ and now takes into account the potential for rates, as well as the new ECB/Fed calls – a cut below neutral to 1.75% for the ECB by mid-year, even though the Fed will be at 4% at that time, and for the ECB interest rates will then be put on hold, but the Fed will towards the end of reduce the year to below 4%.
The bank points to the Eurozone’s vulnerability to trade conflicts due to its dependence on the manufacturing sector, trade openness and policy response (monetary easing instead of fiscal stimulus).
This will strengthen the Japanization of the euro, with the common currency becoming one of the worst-ranked currencies globally in terms of nominal/real returns by 2025.
