Europe faces moderate growth expectations, fueled by political instability and structural problems in Germany and France.
The European currency fell on Thursday to $1.025, its lowest level since October 2022, due to concerns about the outlook in Europe and optimism about the American economy. The euro is falling and the dollar is being pulled up by the return of Donald Trump to the White House on January 20.
Europe faces moderate growth expectations, fueled by political instability and structural problems in Germany and France. The customs tariffs that Donald Trump threatens to impose on partners of the United States increase the risks of a trade war, darkening the prospects of the Old Continent.
The position of central banks aggravates the trends. Across the Atlantic, the Federal Reserve (Fed) is expected to cut interest rates less aggressively than expected, due to inflationary risks linked to Trump's policies. The Fed is only considering two interest rate cuts this year, compared to four previously.
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In Europe, conversely, the central bank has reduced support for the euro. Analysts say the ECB is likely to cut rates at a faster pace than the Fed, given weak economic growth in the eurozone, where inflation is hovering near the ECB's 2% target.
On the foreign exchange market, the greenback also strengthened against the British currency, which fell below 1.24 dollars per pound, its April level. The Japanese currency is holding up against the greenback, benefiting from the optimism of Japanese economists towards further rate increases by the central bank in 2025.
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