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The sharp fall of the euro after the victory of presidential elections of the United States of Donald Trump in November less than $ 1.02 at the beginning of last month meant parity with the dollar seemed inevitable in the eyes of some analysts and investors. Many assumed that the eurozone economy would be on the first line of a complete global commercial war.
But the currency has enjoyed a dizzying demonstration this month, helped by the potential economic elevator to the region of a German plan to inject hundreds of billions of euros in additional funds in the army and the infrastructure of the country. Meanwhile, the dollar has weakened in the midst of the growing anxiety for the health of the US economy.
On Friday, the single currency reached up to $ 1,089, its strongest level from the day after the US elections. Many in the market are now reviewing their parity bets and pushing their highest forecasts.
“The backdrop of Trump’s policy has pushed Europe in a much more fiscal loosening direction than any of us had thought,” said Adam Pickett, a multi -asset strategist in Citigroup. “The European Central Bank may need to reduce less now.”
After the trimming of the interest rate on Thursday, merchants now only have a total price at an additional reduction of a room in 2025, which would carry the deposit rate to 2.25 percent. Approximately one week had a total price at the rate of 2 percent in December.
According to Jefferies, the euro has reached a “for now” fund and will only rise from here this year. “The mood of [the] The euro in 2025 was so sour, and most expected a break from parity, but now the euro is flying, “said Brad Bechtel, bank analyst.
But the threat of tariffs has not been eliminated, and many investors argue that Trump will finally follow the threats to aim at the EU, which he has said “was formed to fuck the United States.”
David Hauner of Bank of America argues that it is too early to ask for a sustainable resurgence of the euro, since it is “only in the last weeks that investors have begun to heat up with the idea that the dollar will weaken” and that the tide can turn “with any new holder.” Mari Novik
Is the US inflation on the way?
The United States inflation is expected to have marked lower in February, but a distance above the objective of the Federal Reserve still remains, amid the concerns about the impact on inflation and economic growth of the commercial tariffs of President Donald Trump.
The consumer price index data owed on Wednesday is established for an inflation reading of 2.9 percent year -on -year for February, according to a reuters consensus prognosis. That would still leave prices growth above the long -term objective of the central bank of 2 percent, and after a 3 percent reading in January.
Rishing volatile items such as food and energy, nucleus inflation is forecast at 3.2 percent year -on -year, below 3.3 percent.
But the strongest numbers expected could boost investors to reduce their predictions for interest rate cuts; A softer number can aggravate concerns about a slowdown of growth driven by Trump’s commercial war, which increases the expectations of the flexibility of monetary policy.
On Friday, market prices indicated that investors bet on about three target cuts by the Fed in 2025, compared to two reductions as recently as the previous week.
Bank of America economists predict that the increase in tariffs on China would increase central goods, excluding the prices of used cars. Meanwhile, the inflation of the central services must be moderated but remain above the levels consistent with the objective of the Fed, the bank said.
“In summary,” economists wrote, “CPI data should reinforce our opinion that inflation progress has been stagnated.” Harriet Clarfelt
Will Canada reduce rates in the middle of the uncertainty?
Economists are increasingly expecting a seventh reduction of consecutive interest rates when the Canada Bank meets Wednesday. But there is still a debate about how much more could the team of Governor Tiff Macklem reduce given the uncertainty that surrounds us the rates plans.
Freight local jobs data on Friday were added to investor expectations for a feature cut, with Canadian interest rates swaps that involve a probability of 80 percent of the BOC policy rate are reduced by a quarter to a 2.75 percent point. That would take the total reductions of the Central Bank from June to 2.25 percentage points.
The softest employment figures followed a series of firmer data that suggested that Canada’s economy was accelerating from the target cuts to date. Recent figures showed that the growth of the GDP of the fourth quarter reached 2.6 percent year -on -year, surprising economists waiting 1.8 percent.
However, expectations for 25 percent of American tariffs in a variety of Canadian goods have changed the image. Even the surprise of a month of this week in most levies, after an imposition of one day, has failed to lift spirits north of the border.
“The new downward risks for the labor market will arise in spring and summer of factors such as tariffs itself, uncertainty due to tariffs and, as we hope, weakening even more in the activity in the United States,” said Citi Economist Veronica Clark.
A survey of reuters economists this week in Canada, the United States and Mexico asking about the recession risks discovered that almost all respondents felt that the risk of a contraction in their respective economies had increased. Jennifer Hughes
