The Euro edged higher to $1.05 after hitting two-year lows earlier this month, though investor sentiment remains cautious amid ongoing economic challenges in Europe and concerns over the potential implications of a second Donald Trump administration.
Euro gains some ground to $1.05
Trump has reiterated his intention to increase tariffs, proposing a 10% hike on Chinese goods and a 25% increase on imports from Mexico and Canada. He also warned of substantial tariffs on European goods, especially automobiles, stating that the EU would "pay a big price."
Manufacturing sector is still weak
These threats add pressure to Europe’s struggling manufacturing sector, fueling expectations of aggressive monetary easing by the ECB. Markets have fully priced in a 25 basis point rate cut next month, while the likelihood of a larger 50 basis point cut has risen to 58%. Investors are closely watching this week’s preliminary Euro Area inflation data, which could offer further insights into the ECB’s upcoming policy decisions.
