The U.S. Federal Reserve reduced interest rates by 25 basis points (bps) in the November meeting, maintaining its expectation that inflation will sustainably reach the 2% target. Investors anticipate that the Fed may cut interest rates a few more times in upcoming meetings.

Trump’s announcement of a 10% import tax on goods from all countries has weakened the euro, as the European Union has the second-largest trade deficit with the United States and is one of its top exporters, according to JPMorgan.

Furthermore, the European Central Bank (ECB) is likely to cut interest rates sooner than the Fed, which could further weaken the euro against the U.S. dollar. The ECB has already reduced interest rates three times this year due to inflation risks in the Eurozone decreasing faster than expected.

Source: Fxstreet