The Euro versus the US dollar is down 8% since September 2024, to a level of 1.02, close to parity.

Some predict the Euro could reach parity by the end of January.

Drivers of the route to parity:

* Political uncertainty in Germany and France.

* Threat of US tariffs making exports more expensive.

* Severe uncertainty in bonds and the government budget in Europe’s neighbor the UK.

* Low interest rates making yields less attractive versus the UK and US.

What can reverse this path?

* US tariffs being more bark than bite.

* Positive election outcomes in Germany and France.

* Unchanged interest rates.

* An end to the Russia Ukraine conflict.

* An upturn in economic data.

Key data to watch

* Purchasing Managers Indexes (PMIs).

* Recent PMIs have been good. If they continue, perhaps some hope.

* Next PMI is January 20, 2024, the day of US Presidential inauguration.

More PMIs will come out towards the end of January and should be watched.

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