Look for parity in EUR/USD in 2025 - JPMorgan

JPMorgan has turned even more euro bearish in the wake of the US presidential election, forecasting a test of parity for EUR/USD by the first quarter of 2025.

At 09:15 ET (13:15 GMT), EUR/USD traded 0.8% at $1.0499, bouncing at the start of the new week, having fallen almost 3% over the course of the last month.

The year 2024 has been another year of eurozone growth disappointment versus the US, said analysts at JPMorgan, in a note dated Nov. 22. 

“Softer-than-expected Eurozone growth isn’t a new phenomenon but instead a trend that has been intact for seven consecutive years, a theme that FX investors are ostensibly bored with but frustratingly continues to manifest in price action,” the bank said.

Unlike 2023, EUR/USD performance in 2024 was driven entirely by rate differentials and other factors receded in relevance. 

The EUR/USD forecast for 2025 looks for a test of parity by 1Q as tariff risks get more fully priced in, with a recovery to $1.08 later in 2025 stemming from potential for mitigating factors and US resilience running out of steam.

The near-term bearish EUR/USD forecast is consistent with our previously published roadmap for the US elections in a ‘Red sweep’ and now accounts for the potential for tariffs as well as the new ECB / Fed calls – a cut to below neutral to 1.75% for the ECB by mid-year even though the Fed will be at 4% at that time, and for the ECB to then be on hold but for the Fed to cut to sub-4% by the end of the year. 

The bank cites eurozone vulnerability to trade conflict stemming from manufacturing reliance, trade openness and the policy response (monetary easing rather than fiscal stimulus).

This will cement the Japanisation of the euro, with the single currency set to become among the worst-ranked currencies globally on nominal/real yields in 2025.

 

Source: Investing.com