European politicians will be waking up to face their fears this Wednesday morning. As it now looks like Trump will take the presidency with a strong popular mandate, his trade agenda of levelling the playing field will weigh heavily on the open economy of continental Europe, ING’s FX analyst Francesco Pesole notes.

Euro goes down on Trump’s possible win

“The euro has so far proved the weakest of the G10 currencies overnight and you can see why. The expectation is that Donald Trump extends his trade war from just China in his first term more broadly in his second term. This at a time of stagnant eurozone growth and self-reflection – especially in Germany – as to its future business model. Plans to export its way out of stagnation are no longer an option for the eurozone.”

“We believe this would be the worst scenario for EUR/USD – faced with renewed trade wars yet without the support to global growth that extended US tax cuts could deliver. Under such a scenario, EUR/USD could be sub parity in late 2025. This would be a scenario where the European Central Bank would have to cut rates deep into accommodative territory.”