EUR/USD daily chart
The drop today brings the pair down to its lowest levels since June, with the daily decline itself set to even eclipse that seen in March 2020. The over 2% drop now is going to be the worst daily decline for EUR/USD since June 2016 amid the Brexit referendum vote. What a day.
Trump’s election win is not only a boost for the dollar but it is somewhat of a double whammy for the euro.
The fear here is that he is going to ramp up trade pressures on the EU and enact tariffs on the region. That will impact the euro area economy further amid an already challenging and slowing outlook going into Q4 this year.
In turn, that might be a cause for consideration for the ECB to cut rates even quicker. And that will potentially be in contrast to the change in Fed outlook now that Trump is president again.
For the Fed, Trump’s domestic and foreign trade policies might spur inflation pressures to return. And that might slow the pace of rate cuts that had been planned by the central bank over the last few months.
As such, it creates a slight divergence in outlook between the ECB and Fed just by the fact that Trump has won. The duality in turn is arguably a part of what is ramping heavy downside pressure on EUR/USD today.
That not to mention the technical outlook, with EUR/USD cracking daily support from the August and October lows as seen above. Pain.