The euro has experienced relative stability recently, showing a 1% increase against the US dollar in the past month and currently trading at $1.08.
Despite this calm, analysts warn that this stability may be deceptive, with potential pressures looming that could drive the euro back to parity with the dollar by the end of 2024 according to El Economista.
U. S. is Key Factor
Deutsche Bank has raised concerns about the euro's future, citing the strength of the dollar and higher interest rates as significant challenges.
George Saravelos, an analyst at Deutsche Bank, points to ongoing US-China trade tensions and the potential return of Donald Trump to the White House as key factors that could destabilize the euro.
Saravelos argues that Europe's economy could become the battleground for a renewed trade war, leading to a deflationary shock that would weaken the euro.
Bank of America Disagrees
The euro's stability is also threatened by US tariff policies. President Biden has already increased tariffs on various Chinese goods, and Trump has suggested even more aggressive measures if he is re-elected. These actions could force Chinese products to flood European markets, creating deflationary pressures.
However, not all analysts agree with this grim outlook. Bank of America and other financial experts believe that while a weaker euro is possible, achieving parity with the dollar is unlikely unless multiple negative scenarios occur simultaneously. They argue that Europe's economic indicators are more positive now than during previous downturns, and that the eurozone's inflation rates are converging towards targets.
