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MENAFN- Daily Forex)
In the final trades of 2024, the Euro experienced increased losses against the US Dollar due to Trump's trade policies. This pushed the most traded pair in the Forex market to its lowest level in two years, reaching the support level of 1.0331. It closed the year near its losses at around 1.0349.
Therefore, the strongest expectations are that the US dollar will continue its upward path in the coming period.
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bank Forecasts for Euro/Dollar in the Coming Months
In this regard, the Forex Analysis Department at Danske Bank expects the EUR/USD pair to decline to a price of 1.0000 over a period of 12 months. Generally, Investment banks are reluctant to forecast a EUR/USD break below parity. Moreover, Wells Fargo expects EUR/USD to trade at 0.98 by the end of 2025. UBS has also revised its forecast slightly, but still expects EUR/USD to recover to 1.10 by the end of 2025.
In general, investment banks generally expect that the policies of the new US administration, represented by tax cuts and tariffs, will put upward pressure on inflation and prevent further US interest rate cuts. Therefore, tariffs are also likely to undermine Eurozone forecasts. In this regard, Nordea Bank commented; "We believe that the US dollar will remain dominant in the forex market during 2025 and that the balance of risks points to further economic divergence that could fuel a stronger dollar."
However, Mitsubishi UFJ Financial Group commented; "The two-year euro-US swap spread fell to a new low of -198 basis points, surpassing its lowest levels recorded during the post-Ukraine invasion period in 2022 when energy prices in Europe soared. That was when the EUR/USD pair was trading well below parity, thus highlighting where the risks lie in the coming months."
However, MUFG Bank commented:“The two-year EUR-US spread fell to a new low of -198 basis points, surpassing the lows recorded during the post-Ukraine invasion period in 2022 when energy prices in Europe surged. This was when EUR/USD was trading well below parity and thus highlights where risks lie in the months ahead.”Fed policy will determine the future of the EUR/USD
In this regard, the Fed cut US interest rates by 25 basis points to 4.50% at its last policy meeting for 2024, in line with expectations. However, there was a shift in expectations from individual committee members. The median forecast is for two US rate cuts in 2025 compared to four cuts in the September 2024 forecast. Markets are now generally assuming no cuts in January 2025 but with a March cut probability of less than 50%. Only two cuts are being calculated for 2025 Tips:
The Euro/Dollar pair will remain weak in the coming months. So, always focus on weakness factors and don't take risks no matter how good the trading opportunities are Trade Wars and Their Impact on the Eurozone
Under a new and controversial US administration, trade policies will be closely monitored with expectations that the Trump administration will use tariffs or the threat of tariffs as a major global economic weapon. In this regard, Nordea Bank commented; "There is also the potential for a stronger dollar in a scenario of an aggressive trade war between the US and the rest of the world. Potential tariffs could put downward pressure on already weak economies outside the US and put upward pressure on US inflation, increasing the likelihood that the Federal Reserve will adopt a hawkish stance. Therefore, "we would not be surprised if tariffs pushed the dollar below parity against the euro."EUR/USD Analysis Today:
Dear reader, out technical outlook for the EUR/USD pair remains bearish at the beginning of the new year. The dominance of bears on the overall trend is still the strongest, and the most important targets for bears are 1.0330, 1.0250, and 1.0180, which are sufficient levels to push technical indicators towards oversold levels. Also, we still recommend selling the Euro/Dollar from every upward level as the factors of Euro weakness are strong and continuous. Ultimately, the US dollar will remain strong until the outlook for the expected Trump policies becomes clear.
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