The EUR is teetering towards parity with the USD, Bloomberg reports citing numerous analysts who warn that the currency could drop further following US president-elect Donald Trump’s inauguration this month. “We’re not far off so it could happen very quickly,” senior strategist at BNY Geoffrey Yu said, adding that “parity is inevitable.”

Where we’re at: The EUR tumbled over 7% since September 2024, recently touching a more-than-two-year low at USD 1.0226. “Sentiment could not be worse,” head of G-10 FX spot trading at Nomura Antony Foster said. The EUR has hit USD parity a small handful of times in its 25 years of existence, Bloomberg notes, most recently in 2022 after Russia launched its invasion of Ukraine.

Options markets suggest a 40% chance that the EUR will hit parity with the greenback in 1Q 2025, with contracts targeting parity gaining over the last week. JPMorgan also expects that parity could be realized this quarter, with Wells Fargo expecting the threshold to occur during the second quarter. Other analysts expect it to happen as soon as this month.

What’s behind the approaching parity: Analysts including Bank of New York Mellon and Mizhuo point to mounting pressures on Europe which could find itself caught in the middle of a trade war following Trump’s move to the White House. Weak economic growth, aggressive ECB rate cuts compared to a slower approach by the Fed, and political instability also contribute to a bearish outlook on the EUR, Bloomberg explained.

The EUR’s falling value is also related to the strength of the USD, which has been risingover the past several weeks since Trump’s reelection. The USD’s rise is likely triggered in large part by Trump’s plans to impose broad tariffs on imports from several countries (including Canada, Mexico, and China), although the question of whether the currency rally will continue depends on whether Trump follows through on his campaign pledges.

MARKETS THIS MORNING-

Asian markets are broadly in the red in early trading this morning, with the exception of South Korea’s Kospi, which is firmly in the green. Hong Kong’s Hang Seng Index is down more than 0.6%, mainland China’s CSI is down 0.8%, and Shanghai is also down 0.4%. The Kospi is bucking the trend so far and is up 1.3%.

Futures suggest a more positive open for Wall Street later today, with futures for the Dow Jones, S&P 500, and Nasdaq all in the green despite all three indexes falling at the end of trading yesterday.

ADX

9,439

+0.1% (YTD: +0.2%)

DFM

5,214

+0.5% (YTD: +1.1%)

Nasdaq Dubai UAE20

4,246

+0.7% (YTD: +2.0%)

USD : AED CBUAE

Buy 3.67

Sell 3.67

EIBOR

4.2% o/n

4.3% 1 yr

TASI

12,113

+0.1% (YTD: +0.6%)

EGX30

29,930

-0.8% (YTD: +0.6%)

S&P 500

5909

-1.1% (YTD: +0.5%)

FTSE 100

8245

-0.1% (YTD: +0.9%)

Euro Stoxx 50

5012

+0.5% (YTD: +2.4%)

Brent crude

USD 77.05

+1.0%

Natural gas (Nymex)

USD 3.46

+0.2%

Gold

USD 2665

+0.7%

BTC

USD 96,505.20

-5.1% (YTD: +3.4%)

THE CLOSING BELL-

The ADX rose 0.1% yesterday on turnover of AED 1.3 bn. The index is up 0.2% YTD.

In the green: Aram Group (+14.8%), Hily Holding (+9.8%) and Eshraq Investments (+5.0%).

In the red: Oman & Emirates Investment Holding Co. (-9.9%), Commercial Bank International (-5.3%) and Al Khaleej Investment (-4.8%).

Over on the DFM, the index rose 0.5% on turnover of AED 811.7 mn. Meanwhile, Nasdaq Dubai rose 0.7%.

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