The euro has been facing challenges due to political uncertainty in Europe, with the possibility of the currency falling to parity against the dollar if the U.S. pursues aggressive protectionist trade policies under a Trump administration. Deutsche Bank predicts that the EUR/USD will remain weak below 1.10 for the next two years, with a forecasted drop to $1.05 by the end of this year.
The recent snap election in France has added to the euro’s pressure, potentially leading to a hard-left or hard-right government, or a hung parliament. This uncertainty not only makes governance difficult but also impacts Europe’s overall competitiveness. Deutsche Bank highlights the negative impact on Europe’s long-term competitiveness and strategic autonomy, regardless of the election outcome.
The bank points to the U.S. election and the possibility of aggressive protectionist trade policies as a potential catalyst for the euro to reach parity against the dollar. Former President Donald Trump has proposed universal baseline tariffs on most foreign products and suggested levies on most imports, indicating a potential escalation of trade tensions.
If Trump wins the upcoming presidential race and follows through on his trade policies, it could further weaken the euro, potentially revising Deutsche Bank’s forecast closer to parity. The bank warns that a Trump victory could be the final push that leads to the euro reaching parity against the dollar.