The Euro versus the US dollar is down 8% since September 2024, to a level of 1.02, close to parity.
Some predict the Euro could reach parity by the end of January.
Drivers of the route to parity:
* Political uncertainty in Germany and France.
* Threat of US tariffs making exports more expensive.
* Severe uncertainty in bonds and the government budget in Europe’s neighbor the UK.
* Low interest rates making yields less attractive versus the UK and US.
What can reverse this path?
* US tariffs being more bark than bite.
* Positive election outcomes in Germany and France.
* Unchanged interest rates.
* An end to the Russia Ukraine conflict.
* An upturn in economic data.
Key data to watch
* Purchasing Managers Indexes (PMIs).
* Recent PMIs have been good. If they continue, perhaps some hope.
* Next PMI is January 20, 2024, the day of US Presidential inauguration.
More PMIs will come out towards the end of January and should be watched.
