(MENAFN- Investor Ideas) Investorideas ( ), a go-to platform for big investing ideas releases market commentary from Rania Gule, Senior Market Analyst at XS
. The EUR/USD currency pair is experiencing a period of volatility, currently trading at 1.0625 following the release of U.S. inflation data. The euro is under downward pressure due to numerous Political and economic challenges, raising questions about its future. In my view, the uncertainty surrounding trade relations between the United States and the Eurozone-specifically, the U.S. administration's intention, led by newly elected President Donald Trump, to impose additional tariffs on European imports-will significantly impact the euro.
Trump has pledged to increase tariffs on imports by 10% in support of domestic products and to bolster the U.S. economy, which could spark a trade war with the Eurozone, diminishing the appeal of the European currency and increasing demand for the U.S. dollar as a safe haven.
Olli Rehn, the European Central Bank (ECB) governor, has indicated that the bank aims to bring interest rates to a neutral level by the first half of 2025, estimated to be between 2% and 2.25% according to the bank's projections. In my opinion, this long-term outlook on interest rates, coupled with the ECB's adoption of an extended easing policy, may weaken the euro's attractiveness compared to the dollar. This is especially likely if upcoming U.S. inflation data aligns with expectations for annual inflation to reach 2.6%. High inflation in the U.S. could keep the Federal Reserve in a relatively hawkish position, boosting the dollar and pushing the EUR/USD pair toward further declines.
Markets are increasingly anticipating the upcoming U.S. data, as the October Consumer Price Index (CPI) report plays a pivotal role in shaping expectations for U.S. monetary policy. Although the market expects the Federal Reserve to cut rates by 25 basis points in December, this decision remains uncertain, especially with improving U.S. economic forecasts and inflationary pressures linked to Trump's economic policies. Accelerating inflation could raise borrowing costs and keep the Federal Reserve cautious about easing monetary policy, increasing demand for the dollar and weakening the euro.
The euro is also experiencing internal pressures due to Germany's fragile political situation. The collapse of the ruling coalition after Chancellor Olaf Scholz dismissed Finance Minister Christian Lindner has created political instability in the Eurozone's largest economy. The market is likely to face further uncertainty ahead of the confidence vote scheduled for December, which could lead to early elections. In my view, all these political developments may render the euro more vulnerable to the dollar, especially if the U.S. continues to deliver strong economic data and if transatlantic trade war risks intensify.
Investors will also keep an eye on any new guidance from ECB President Christine Lagarde regarding interest rates, which may clarify the future path of monetary policy in the region. However, short-term forecasts do not appear favourable for the euro unless the ECB takes bolder steps to address rising inflation, particularly as the U.S. Federal Reserve gradually reduces rates to support U.S. economic stability.
In conclusion, I believe the political and economic challenges facing the Eurozone place the euro in a weak position against the dollar. The EUR/USD pair is expected to remain under downward pressure amid political uncertainty in Europe and increasing prospects of a trade war with the United States.
About Investorideas - Big Investing Ideas
Investorideas is the go-to platform for big investing ideas. From breaking stock news to top-rated investing podcasts, we cover it all. Our original branded content includes podcasts such as Exploring Mining, Cleantech, Crypto Corner, Cannabis News, and the AI Eye. We also create free investor stock directories for sectors including mining, crypto, renewable energy, gaming, biotech, tech, sports and more. Public companies within the sectors we cover can use our news publishing and content creation services to help tell their story to interested investors. Paid content is always disclosed.
Disclaimer/Disclosure: Investorideas is a digital publisher of third party sourced news, articles and equity research as well as creates original content, including video, interviews and articles. Original content created by investorideas is protected by copyright laws other than syndication rights. Our site does not make recommendations for purchases or sale of stocks, services or products. Nothing on our sites should be construed as an offer or solicitation to buy or sell products or securities. All investing involves risk and possible losses. This site is currently compensated for news publication and distribution, social media and marketing, content creation and more. Contact management and IR of each company directly regarding specific questions. More disclaimer info: More disclaimer and disclosure info Learn more about publishing your news release and our other news services on the Investorideas newswire /News-Upload/ Global investors must adhere to regulations of each country.
MENAFN13112024000142011025ID1108883153
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.