Last Thursday, the American currency rose 0.98% against the European currency to 1.0248 dollars per euro. It was driven by various factors, including the imminent return of Donald Trump to the White House. Analysts believe that there could be parity between the euro and the dollar again in 2025 as was the case in 2022.
This hadn’t happened for over two years. On Thursday, January 2, the American currency climbed 0.98% against the European currency to 1.0248 dollars per euro. A little earlier that day, it was even trading at 1.0314 euros. This is its best level since the end of November 2022. This Monday, January 6, the American currency returned to 1.04 dollars per euro.
The dollar buoyed by the coming to power of Donald Trump
This strong surge in the dollar last Thursday can be explained by a range of factors. Firstly by the imminent return of Donald Trump to the White House. Easily elected in November against Kamala Harris, the Republican leader must actually take office on January 20. From the first days of his victory, he made several declarations related to his economic program. He notably announced tax cuts and an increase in customs duties.
Trump, Mister «Taxman»
Donald Trump has threatened to impose customs duties of 10 to 20% on all products entering the United States. For Chinese goods, he is even considering going up to 60 or even 100%. Mister “Taxman” also promised a 25% increase in customs tariffs on products coming from Canada and Mexico, two neighboring countries that he blames for all America’s ills.
Fear of a massive price rise in the United States
Its inflationary policies could lead to a sharp rise in prices. According to a survey by recruitment company Resume Templates, 82% of American companies plan to increase their prices if new tariffs are actually implemented. Donald Trump assures that these tariffs can have a positive impact on the American economy, if they are “used properly”.
The dollar pushed by the Fed’s firmer posture
Another lever for the dollar’s rise against the euro is the firmer-than-expected posture of the American Federal Reserve (Fed). Incorporating the inflation risks linked to the new president’s policies, the institution has significantly revised its inflation forecast for 2025. It now expects it to be around 2.5%, compared to 2.1% in its previous publication. in September.
The EU hampered by political instability
The Fed also cut its interest rate by 25 basis points as expected, bringing it to a range between 4.25% and 4.50%. But it now only provides for two relaxation cycles, of the same amplitude, over the entire year 2025, instead of four previously. Faced with this hawkish approach, the European Central Bank (ECB) remains apathetic. The institution is hampered by political instability and weak growth in the euro zone, where inflation is approaching the 2% target. Building on this context, it should reduce its rates at a more sustained pace than that of the Fed.
Towards dollar-euro parity in 2025
Analysts believe that the current situation will not improve significantly. They expect the Euro-dollar pair to reach parity in 2025. This level has not been seen since 2022, when Russia launched its invasion of Ukraine. “Further gains are likely (…) the positive factors for the dollar remain intact,” say analysts at Brown Brothers Harriman two weeks before the inauguration of Donald Trump.
