CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

Trade to watch: Will EUR/USD hit parity in 2025?

Article By: ,  Senior Market Analyst
Sunday 12:01 PM

EUR/USD has fallen sharply from the 1.12 level it was trading it just a few months ago. But a lot can change in the markets over a quarter and EUR/USD struggles below 1.0450.

With Trump heading to the White House and a widening gap between the US and eurozone economies, the EUR/USD remains weak, with the prospect of testing parity in H1 2025.

Dovish ECB, weak growth & political instability

The ECB was among the first major central banks to cut rates in June and has reduced rates by 25 basis points at four meetings this year. While inflation appears under control, growth looks weak at best, with the potential for a recession rising. Weak consumption is expected to continue into 2025.

Along with economic woes, political uncertainty is likely to linger at the start of the year, with a snap election in Germany in February and ongoing instability in France after Michel Barnier’s government collapsed.

Trump 2.0

The USD is trading at a two-year high as we head towards the end of the year. Trump's victory in the US elections has been the key catalyst for the USD’s latest leg higher.

Trump’s policies are expected to be inflationary amid plans to cut taxes and impose tariffs on foreign goods and services. These policy measures come at a time when the US economy is showing resilience and solid employment levels.

While the Federal Reserve has cut rates at three meetings, the dot plot pointed to a slower pace of cuts in 2025 after the Fed upwardly revised its inflation outlook for the year. Only two rate cuts are expected this year, supporting the USD.

Fed - ECB divergence

The Fed forecasts two rate cuts next year and upwardly revised its growth forecast. Meanwhile, the ECB is expected to cut rates further this year amid weak growth. Should Trump implement trade tariffs in Europe, this could slow growth further, ramping up the need for further rate cuts.

The bottom line is that the Fed faces upward inflationary pressures, while the ECB risks needing to cut rates more aggressively. This could pressurize EUR/USD, further pulling the pair towards parity.

Where next for EUR/USD?

On the weekly chart, EUR/USD rebounded lower from 1.12, dropping to support at 1.0330. While the price recovered from this low, it failed to retake 1.0630 before falling again.

Sellers supported by rejection at 1.0630 and the RSI below 50 will look to extend this bearish run below 1.0330 toward 1.02 and parity.

Buyers will need to retake 1.0630 to create a higher high and put a more positive spin on the chart.

 

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2025