Concern in Europe: The euro plunges to its lowest level in two years against the dollar

A worrying tumble for the euro

The euro continues its fall against the dollar, reaching this Friday its lowest level since November 2022. The European currency fell by 0.44%, settling at 1.0428 dollars around 11:30 a.m., with a minimum recorded at 1.033 dollars. during the day, depending on Investing.com.

This decline marks a trend that began at the beginning of October, when the euro lost 7% against a dollar strengthened by a favorable economic and political outlook.

Disappointing economic indicators

The fall of the euro is partly explained by worrying economic data in the euro zone. The PMI indices, leading indicators of activity in the private sector, fell to 48 in November, their lowest level in ten months. A figure lower than the expectations of economists, who were banking on maintaining it at 50, the threshold separating growth and contraction.

Meanwhile, Germany's gross domestic product (GDP) grew by only 0.1% in the third quarter, compared to 0.2% expected, according to Destatis. This economic weakness adds to political instability in France and early elections in Germany, exacerbating the climate of uncertainty.

The impact of American politics

Donald Trump's victory in the US presidential election also contributes to pressure on the euro. The president-elect's economic program, centered on high customs duties and increased domestic growth, favors a strengthening of the dollar. According to UBS, Trump's trade policies could include tariffs of 60% or more on China, reducing the competitiveness of non-dollar currencies in U.S. markets.

This dynamic is pushing several analysts, such as those at Deutsche Bank, to predict a fall in the euro below parity with the dollar, with a possible decline to $0.95 or less if Trump's agenda is fully implemented. artwork.

What prospects for the euro?

With bond yields falling in the euro zone – Germany's 10-year yield has risen to 2.257%, and France's to 3.05% – the European Central Bank may have room to maneuver reduce its rates. However, this strategy risks worsening the weakness of the euro.

Capital Economics predicts that the euro could fall to $1 or less by the end of 2025, accentuating a trend that worries markets. If Europe does not respond quickly to current economic and geopolitical challenges, pressure on its currency could intensify, further strengthening the dollar's dominance in global markets.