The firm MUFG anticipates that the EURUSD currency pair will likely dip below parity in the forthcoming weeks. This prediction stems from several key factors:

• The imminent implementation of trade tariffs by President Trump soon after his January 20 inauguration.
• The expectation that the Trump administration will act quickly in its tariff enforcement.
• A comparatively weaker economic outlook for the Eurozone versus the United States, combined with a lack of profit-taking in EUR short positions.

Market Implications

As traders brace for these developments, the sentiment surrounding the euro remains tepid. The absence of a rally into the end of 2024 suggests that bearish positions may dominate the market.

Conclusion

In conclusion, MUFG’s forecast underscores the potential for EURUSD to navigate challenging waters ahead as the realities of trade tariffs unfold. Traders should prepare for volatility and consider strategies that account for shifts in currency dynamics.