Daily digest market movers: EUR/USD drops as US Dollar bounces back

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  • EUR/USD is also facing sharp selling pressure due to the Euro’s (EUR) underperformance against its major peers, except for Asia-Pacific currencies. The Euro is down as investors are worried about the Eurozone economic outlook due to Trump’s victory, the dissolution of Germany’s three-party coalition, and growing risks of inflation remaining below the European Central Bank’s (ECB) target of 2%.
  • Higher tariffs by the US would strain the Eurozone’s export sector, likely hitting economic growth. “Uncertainty is high on many levels, from the exact impact of US tariffs to the timing of their implementation to how and when Europe responds,” Deutsche Bank analysts said. 
  • Meanwhile, the Deutsche Bank also sees the ECB’s Deposit Facility rate heading to 1.5%, down from the 2.25% previously projected, due to weakening macroeconomic conditions and inflation risks falling below target. 
  • The collapse of the German coalition after Chancellor Olaf Scholz dismissed Federal Minister of Finance Christian Lindner has paved the way for snap elections in early 2025. The scenario of political uncertainty limits the growth potential of an economy due to the postponement of fiscal spending by the government.


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