Strategists at deutsche bank expect the euro to fall to parity against the dollar in the second quarter of 2025, due to the repricing by central banks and additional dollar risk premiums.

The extent of the euro's weakness will largely depend on the policy mix introduced by the Trump administration, the speed of implementation, and the policy responses from other countries, wrote a team including George Saravelos.

The euro against the dollar is reported at 1.05, down about 6% from the September peak; it hit a two-year low of 1.0335 last Friday.

We believe the dollar or the broader market has almost no pricing in of tariff risks and fiscal easing.

As 2026 arrives, Europe's policy responses could boost the euro.

In the bond market, the 10-year US Treasury yield is expected to reach 4.75% in 2025, while the 10-year German bond yield is expected to be at 2.5%.