EUR/USD kicks off 2025 with a fresh move to the downside

• EUR/USD fell 0.8% on the first trading day of the new year.
• Bearish sentiment looms large over the battered Euro.
• Rate differential set to widen further, analysts expect parity in 2025.

EUR/USD took another leg lower to kick off the 2025 trading season, falling eight-tenths of one percent and tapping the 1.0250 level for the first time since November of 2022, a nearly 26-month low. European Manufacturing Purchasing Managers Index (PMI) data missed the mark on Thursday, only adding to Euro traders’ woes following a dovish appearance from European Central Bank (ECB) policymaker Yannis Stournaras later in the day.

According to ECB Governing Council member Yannis Stournaras, the ECB is on pace to trim interest rates in a steady decline through 2025. The ECB is expected to land somewhere in the neighborhood of 2% later this year, according to the ECB’s Stournaras. With the Federal Reserve (Fed) on pace to trim interest rates at a much slower pace than previous expected in 2025, the Euro’s interest rate differential is set to widen significantly through the rest of the year, which will keep downward pressure on EUR/USD in the long run. This falls in line with expectations from some analysts who are calling for the Euro to hit parity with the Greenback sometime this year.