After the US presidential election, the euro's bearish sentiment is high, with many institutions predicting it will fall to parity with the US dollar.

After the unveiling of the results of the US presidential election, currency strategists quickly adjusted their forecasts for the euro. In the past week, at least 10 banks, including Barclays Bank, Deutsche Bank, and Nomura International, have all lowered their exchange rate expectations for the euro, predicting that the euro will fall to parity with the US dollar. This shift contrasts sharply with the situation in recent months where many banks had been raising their euro forecasts. Options market bets also indicate that traders are predicting the outlook of President Trump's term by betting on a depreciation of the euro. The change in the currency market landscape is primarily driven by expectations that global trade restrictions could become a key pillar of President Trump's economic policy upon returning to the White House. This has led investors to sell off euros, as tariffs may harm European export industries, while major European economies face political uncertainty. Since Trump's victory, the euro has fallen by nearly 3%, approaching this year's low point. Multiple banks and institutions have provided specific forecasts for the euro. For example, Pictet Wealth Management predicts a 6% decline in the euro against the US dollar to reach parity; Credit Suisse estimates that by January, when Trump takes office, the euro will drop to $1.03 and may remain at parity; Mizuho International forecasts the euro to reach $1.01 against the dollar by March; while Rabobank predicts that by early 2026, the euro-dollar exchange rate will reach this level, making it one of the largest downgrades among banks. Overall, analysts tracked by Bloomberg forecast a euro-dollar exchange rate of $1.09 next year, a significant decrease from the pre-election level of $1.13. The options market also indicates that the euro is likely to weaken further. Data shows that around 2 billion euros were bet last month on ordinary options predicting the euro-dollar exchange rate to fall to $1 next year. Additionally, bets on the depreciation of the euro by hedge funds and other leveraged investors have lingered at the highest level in three years and may increase further. Furthermore, some banks point out that if Trump implements global tariffs and US tax cuts, the euro-dollar exchange rate could further decline. The impact of tariffs on the European economy could also mean that the ECB will cut rates faster than the Fed, while US growth-promoting policies might stimulate inflation and slow down accommodative policies. Meera Chandan, FX strategist at JPMorgan, stated in her analysis, "Once the downward trend of the euro against the dollar is confirmed, we may see it break below the $1.05 mark and approach parity." Chandan and her team believe that the euro is facing a double blow from trade tariffs and negative sentiment within Europe. While Germany narrowly avoided an economic recession, the collapse of its government, coupled with political instability in France following early elections, has added uncertainty to the outlook for the European economy. However, some question the idea of the euro falling to parity. For example, Amundi SA points out that the market is heavily leaning towards a depreciation of the euro, but the dollar is unlikely to appreciate too much. Andreas Koenig, Global Head of Currency Management at the asset management company, analyzed, "Although the dollar is showing strong momentum, it is unlikely to sustain a significant appreciation given the substantial holdings of dollar assets by numerous institutions." At the same time, some institutions are watching whether the euro can break through the $1.05 support level, and if it does, they will consider increasing their short euro positions. The strategy of RBC BlueBay Asset Management implies that once the euro drops below $1.05, they may intensify selling of the euro. "Market has yet to fully reflect the possibility of a Republican landslide victory," commented Neil Mehta, portfolio manager at the institution. "Trump's tough stance could lead to a standoff between the parties, casting a heavy layer of uncertainty over the future of the European economy." Overall, the results of the US presidential election have had a significant impact on the currency market, with many banks and institutions adjusting their forecasts for the euro. While some believe the euro will fall to parity with the dollar, others are skeptical. The future trajectory of the euro will depend on the combined effects of various factors.