Since the euro came into existence in 1999, the currency has traded at equal value to the US dollar only a handful of times. The last instance was in 2022, after Russia’s full-scale invasion of Ukraine sparked an energy crisis in Europe and provoked fears of a recession, plunging the currency pair to a 1:1 ratio. Now, some market watchers see a return to parity this year as virtually inevitable. Here’s why:
The euro has been dragged lower by speculation that the US will restrict trade with the region’s export orientated economies, leading the European Central Bank to cut interest rates more aggressively. After moving to raise tariffs on imports from Canada, Mexico and China in early February, US President Donald Trump said tariffs on the European Union will “definitely happen”. The US is a big buyer of the euro area’s exports, from cars to chemicals and luxury handbags, and higher tariff would weigh on the single market’s already weak economy.
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