Concerns escalate regarding euro's potential decline to parity with US dollar
Date
10/20/2024 1:30:02 AM
(MENAFN) Concerns are escalating regarding the euro's potential decline to parity with the US dollar, largely fueled by recent cuts in European interest rates and ongoing trade threats from former President Donald Trump. The possibility of the euro reaching this critical threshold has become more pronounced as the US presidential election nears, with analysts suggesting that a Trump victory could trigger a global trade war.
Michael Hart, the chief currency strategist at Pictet Wealth Management, has indicated that the imposition of extensive tariffs by Trump could significantly impact the euro, pushing it closer to matching the dollar's value. As hedge funds respond to these market dynamics, there has been a noticeable increase in bets against the euro, with options contracts being used to hedge against a decline in the euro's value, particularly in the USD1.08-USD1.07 range. Additionally, interest in contracts targeting the USD1.05 level is also on the rise.
European Central Bank President Christine Lagarde has expressed concern that US tariffs could present further risks to an already slowing European economy. This warning comes in the wake of the ECB's announcement of its second consecutive interest rate cut, with expectations for additional cuts on the horizon.
Arup Chatterjee, a strategist at Wells Fargo, emphasized the euro's vulnerability, highlighting Europe's sensitivity to shifts in US foreign policy. Meanwhile, George Saravellos, head of currency research at Deutsche Bank, posits that a global trade war could lead the European Central Bank to reduce interest rates more aggressively than the market currently anticipates. This scenario increases the likelihood of the euro breaking parity with the dollar before the end of the year, underscoring the potential for significant economic shifts in the coming months.
As the situation develops, the interplay of interest rate decisions, trade policies, and geopolitical factors will play a crucial role in determining the euro's trajectory against the dollar, leaving investors and policymakers alike on high alert.
MENAFN20102024000045015687ID1108798428
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.