EUR/USD: Risk of falling below parity in the second quarter and beyond – Rabobank

For some years now, there has been discussion about the decline of the Western-style liberalism that has dominated the developed world since World War II. The rise of populism in some parts of Europe is part of that discussion, as are the protectionist and nationalist policies promoted by Trump, says Jane Foley, an FX analyst at Rabobank.

EUR/USD risks reaching parity in Q2 and falling below it

“Just days into his second term, Trump has already caused a great deal of disruption. Included in that are his withdrawals from the Paris Climate Agreement (again) and from the WHO. He has also previously raised the threat that the U.S. “The US leaves NATO, all in the interest of putting ‘America First.’ Trump’s stance, while not entirely surprising, further undermines liberal principles of cooperation and shared interests.”

“In the same vein, the US Administration’s position on climate change has resulted in US banks leaving the Net Zero Banking Alliance. Canadian banks are reportedly following suit. Given the risks to the competitiveness, it is perhaps inevitable that the FT has reported that several European banks may be considering their position. It is in the context of less cooperation that some commentators have questioned whether the World Economic Forum in Davos is now less relevant than it used to be. “

“Furthermore, in the context of the poor economic situation in Germany and France, questions are being raised about how Europe can compete with the US given Trump’s low regulations and lax fiscal policies. The recovery of both the USD and the US stocks since early October reflect the enthusiasm with which investors have embraced Trump’s policies. Although the lack of tariffs on the first day has allowed the USD to take a breather this week, the structural nature of Europe’s economic problems. and its weak growth outlook suggest that the EUR/USD may have further declines. We maintain our EUR/USD parity forecast in the second quarter and see the risk of declines below.”

Source: Fx Street

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