Investing.com – Investing has struggled lately as political uncertainty re-emerges in Europe, but events overseas in the U.S. could have an even bigger impact, possibly pushing the euro towards parity with the dollar if the Trump White House pursues aggressive protectionism Trade policy.
“We see EUR/USD (and many other dollar pairs) remaining weak below 1.10 for the next two years,” Deutsche Bank said in a note, according to Forexlive, forecasting a decline in EUR/USD to $1.05 by the end of this year.
The euro has come under pressure as political uncertainty once again rocks the continent following a surprise early election in France that could leave the country with a radical left or far right government or a hung parliament, which will not only make governance more tough but also likely to impact overall competitiveness Europe.
“The main negative impact is on Europe’s long-term competitiveness and strategic autonomy, regardless of who wins,” Deutsche Bank added.
However, the bank says a downgraded EUR/USD parity forecast could still be ahead, signaling “the US elections and the extent to which aggressive protectionist trade policies are being pursued” as a potential negative catalyst for the euro.
Former President Donald Trump announced an intensification of the trade war, proposing “widespread base tariffs on most foreign products” and floated the idea of imposing tariffs on most imported goods.
If Trump manages to declare victory in the upcoming presidential race, it will probably be the final nail in the coffin that will push the euro towards parity with the dollar.
“If this happens, we will likely revise our EUR/USD forecast towards parity,” the bank added.