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- EUR/USD 2025 Forecast: Parity Looms as US-Europe Economic Gap Widens
EUR/USD 2025 Forecast: Parity Looms as US-Europe Economic Gap Widens
Here's what you should know for Wednesday, December 25
AtoZ Markets
December 25, 2024
The EUR/USD pair has had quite the journey this year. It kicked off 2024 trading at around 1.1040 but wrapped up near its yearly low of 1.0332. The Euro initially seemed unstoppable, peaking at 1.1213 by September, but the momentum faded as inflation worries and central bank policies took center stage.
In Europe, the ECB made surprising moves, cutting interest rates four times in response to weak growth rather than inflation—a shift they were hesitant to admit outright. Economic growth across the EU stayed sluggish, with concerns of a potential recession looming. Adding to the drama, political instability in Germany and France only worsened the outlook.
Meanwhile, the US Dollar flexed its strength. The Dollar Index hit a two-year high in December, fueled by Donald Trump's election victory and the Republicans’ control of Congress. Optimism about his tax and fiscal policies drove Wall Street to record highs, even as inflationary risks stirred concerns.
Looking to 2025, the economic divergence between the US and the Eurozone seems likely to widen. While the Fed signals fewer rate cuts ahead, citing resilient growth, the ECB faces the tough task of propping up an economy weighed down by political and economic woes.