Experts: Euro-dollar parity likely in 2025

• Trump election could monetary policy the Fed and ECB influence
• Intensified war in Ukraine puts euro under pressure
• Experts believe euro-dollar parity is possible

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Thanks to the red wave in the USA – in addition to Donald Trump’s victory, the Republicans have also secured the majority in Congress – the US dollar index, which measures the dollar against a basket of currencies, has climbed to its highest level in a year. This is due to Trump’s announced tariffs and tax cut plans, which are likely to increase inflationary pressure in the USA, which is why the US Federal Reserve may become more cautious with interest rate cuts. Higher interest rates generally support a currency.

Experts expect EUR/USD parity

As “CNBC” reports, against this background, numerous experts expect that the US currency will continue to gain strength. “The euro has suffered more than most other currencies from Trump’s election victory, and we doubt that this will ease in the foreseeable future,” the US news portal quotes, for example, from a customer note by James Reilly. The senior market economist at Capital Economics predicts the euro will catch up with the dollar by the end of 2025. While the US Federal Reserve could cut interest rates more slowly and thereby strengthen the dollar, the European Central Bank could loosen its monetary policy even more than it would have already, given the “economic shock from declining exports,” argues Reilly.

Reilly is by no means alone in this opinion. According to “CNBC”, economists at Barclays and Goldman Sachs also expect that a 10 percent tariff on European products and subsequent retaliatory measures will lead to currency parity.

ECB chief economist Lane for further interest rate cuts

The chief economist of the European Central Bank (ECB), Philip Lane, has already spoken out in favor of further interest rate cuts to support the economy. With regard to possible tariffs from the US, Lane said in an interview with the French financial newspaper Les Echos that the extent of the problem would depend on “how widespread protectionism is and how quickly it is implemented.”

Euro under pressure

So while the greenback is receiving a tailwind from the Trump election, the euro, on the other hand, is being weighed down by the intensification of the war in Ukraine. In response to the Ukrainian deployment of long-range missiles manufactured in the United States into Russian territory, Russia changed its nuclear doctrine and thereby lowered the threshold for the use of its nuclear weapons.

Given this development, the demand for safe investments is growing. This supported the U.S. dollar, Jane Foley, head of foreign exchange strategy at Rabobank, told CNBC. “If tensions related to the Russia-Ukraine war continue, the rise has the potential to accelerate EUR/USD’s downside and increase the chances of a break below parity,” the expert is quoted as saying.

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