According to the latest research from JPMorgan, the euro against the dollar may remain in the parity range (1.00-1.02) over the coming quarters. The bank stated that the overwhelming victory of the Republican Party in the U.S. elections provides further potential momentum for the strengthening of the dollar and recommends that investors continue to short the euro.
The Logic Behind a Stronger Dollar: Dual-Driven by Policy and Market
JPMorgan analyst Patrick R Locke pointed out, "We maintain a bullish stance on the dollar, expecting U.S. policies to soon become clearer, potentially including the realization of tariff risks and more explicit fiscal stimulus programs. These factors will further support the dollar's strength." The bank advises investors to directly sell the euro against the dollar to capture opportunities in the dollar's appreciation.
JPMorgan foreign exchange strategist Meera Chandan believes that the policy transmission path following the U.S. election will have a profound impact on the global foreign exchange market through tariffs and fiscal measures. The possible introduction of tariff policies will not only pressure trading partners but may also further strengthen the dollar's position due to changes in market sentiment.
Chandan notes that the dollar has several advantages: superior economic growth, high yields, defensive attributes, and strong stock market performance. This "dollar exceptionalism" makes it unique among major global currencies, even without specific tariff announcements, as market shocks to other countries' sentiments will further highlight the dollar's appeal.
The Impact of European Central Bank Policies on the Euro
JPMorgan also points out that the European Central Bank's accommodative policies may place greater pressure on the euro in the future. Analysts predict that to address continued economic sluggishness, the ECB might adopt further easing measures, exacerbating the downward trend of the euro against the dollar.
The bank expects that in the coming quarters, the euro against the dollar could fall to the 1.00-1.02 range. This forecast is closely tied to the ECB's policy direction, as further monetary easing will weaken the euro's competitiveness relative to the dollar.
The New U.S. Government's Policies as a Key Variable
The market is currently highly focused on the policy direction of the new U.S. government. Trump has indicated that he plans to swiftly appoint key positions and expedite policy implementation. Such actions will have a profound impact on the global foreign exchange market, especially by exerting pressure on trade partners through tariff policies.
JPMorgan analysis suggests that tariff policies will become a core driver of global foreign exchange market volatility, enhancing the dollar's dominant position. Even without specific policies in place, changes in market expectations are sufficient to keep the dollar robust on the international stage.
The Dollar Still Has Upside Potential, Euro Under Pressure
JPMorgan's forecasts indicate that under the dual influences of U.S. policy promotion and ECB easing, the dollar against the euro is expected to maintain its strength in the coming quarters, potentially approaching parity. For investors, seizing this trend may become an important short-term strategy. However, the progress of policy execution and changes in market sentiment need continuous attention to determine key turning points in future currency trends.
