EUR/USD plummets on Trump's landslide victory, Fed policy takes center stage


  • EUR/USD is hit badly with Trump’s victory in the US presidential election.
  • The Fed is expected to cut interest rates again on Thursday but by a lower size of 25 bps.
  • The Euro underperforms across the board as concerns over Eurozone economic growth have deepened.

EUR/USD nosedives to near 1.0700 in Wednesday’s North American session, the lowest level in over four months. The major currency pair hits badly as Republican candidate Donald Trump takes the Senate from Democrats after gaining an unconquered lead in key battleground states, according to The Associated Press. The agency shows that Trump has won over 270 seats, which is necessary to form the government.

Trump's victory is expected to keep the US Dollar (USD) on the front foot. At the time of writing. the US Dollar Index (DXY), which gauges Greenback’s value against six major currencies, surges to 105.30. Market action clearly shows that Trump’s victory is favorable for the US Dollar, which was already anticipated as the Republican candidate vowed to hike tariffs on imports and lower corporate taxes. A scenario that will boost overall business activity and labor demand and escalate inflationary pressures. 

However, the plot is unfavorable for currencies of economies like the Eurozone, the United Kingdom (UK), China, and Canada, which are major trading partners of the United States (US). Trump’s protectionist policies will directly impact the export sector of the above-mentioned economies, which will boost the risks of an economic downturn.

Daily digest market movers: EUR/USD weakens Euro's weak performance and firm US Dollar

  • EUR/USD faces severe selling pressure due to the US Dollar’s outperformance and the Euro’s (EUR) sharp depreciation against other major currencies. The outlook of the Euro has weakened as market participants expect that the implementation of Trump’s protectionist policies will significantly damage European economic growth.
  • According to the Dutch bank, Trump's tariffs would shave approximately 1.5 percentage points off European growth, translating to a potential €260 billion economic loss based on Europe's estimated 2024 GDP of €17.4 trillion.
  • Should Europe's growth falter under Trump's tariffs, the European Central Bank (ECB) may be compelled to respond aggressively, slashing rates to near zero by 2025, according to Euronews.
  • Trump’s victory would likely force the ECB to cut its Deposit Facility Rate by a larger-than-usual size of 50 bps in its next monetary policy meeting in December. This would be the fourth interest rate cut by the ECB this year.
  • Going forward, investors will also focus on the Federal Reserve’s (Fed) monetary policy decision, which will be announced on Thursday. According to the CME FedWatch tool, traders have priced in a 25-basis point (bps) interest rate cut, pushing rates lower to the 4.50%-4.75% range. This would be the second interest rate cut by the Fed in a row. However, the rate cut size will be lower than the 50 bps announced in the September meeting.
  • Investors will also focus on Fed Chair Jerome Powell’s press conference to get cues about the impact of Trump’s victory on the interest rate path and the inflation outlook.

Technical Analysis: EUR/USD declines toward 1.0600

EUR/USD slides swiftly to near the key support of 1.0700. The outlook of the major currency pair weakens as it breaks below an upward-sloping trendline around 1.0750, which is plotted from the April 16 low at around 1.0600

The declining 50-day Exponential Moving Average (EMA) near 1.0930 suggests a firm bearish trend.

Additionally, the 14-day Relative Strength Index (RSI) retreats below 40.00, suggesting a resumption of the bearish momentum.

Looking down, the shared currency pair could decline to the year-to-date (YTD) low of 1.0600. On the upside, the round-level resistance of 1.0800 will act as a key barrier for the Euro bulls.

 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

EUR/USD pares gains below 1.0500 amid Conservatives German election win

EUR/USD pares gains below 1.0500 amid Conservatives German election win

EUR/USD pares gains back below 1.0500 in the European session on Monday. The pair still stays supportec by the German Conservatives Party win in the federal election, which revived hopes for better economic outlook. The upside remains elusive due to a cautious mood and mixed German IFO data. 

EUR/USD News
GBP/USD eases to near 1.2650 ahead of BoE-speak

GBP/USD eases to near 1.2650 ahead of BoE-speak

GBP/USD reverses gains to trade near 1.2650 in European trading on Monday. The pair eases as the US Dollar pauses its decline but the downside appears capped ahead of speeches from several BoE policymakers. 

GBP/USD News
Gold price remains stuck in multi-day-old trading range near all-time peak

Gold price remains stuck in multi-day-old trading range near all-time peak

Gold price continues with its struggle to gain any meaningful traction and remains confined in a multi-day-old trading range through the first half of the European session on Monday. Investors remain worried that Donald Trump's trade tariffs would trigger a global trade war which continues to act as a tailwind for the safe-haven bullion.

Gold News
Solana drops below $160, liquidating $26 million in leverage as negative funding rate weighs in

Solana drops below $160, liquidating $26 million in leverage as negative funding rate weighs in

Solana price extends its decline and trades around $160 on Monday after falling over 11% last week. The recent correction in SOL has triggered a wave of over $26 million in liquidations in the last 24 hours and $110 million last week.

Read more
Money market outlook 2025: Trends and dynamics in the Eurozone, US, and UK

Money market outlook 2025: Trends and dynamics in the Eurozone, US, and UK

We delve into the world of money market funds. Distinct dynamics are at play in the US, eurozone, and UK. In the US, repo rates are more attractive, and bills are expected to appreciate. It's also worth noting that the Fed might cut rates more than anticipated, similar to the UK. In the eurozone, unsecured rates remain elevated.

Read more
The Best brokers to trade EUR/USD

The Best brokers to trade EUR/USD

SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.

Read More

Forex MAJORS

Cryptocurrencies

Signatures

Best Brokers of 2025