COMMENT-Look out below as EUR/USD faces Trump 2.0

EUR/USD hit a 4-1/2-month low Wednesday as U.S. yields (US2YT=RR) and the dollar rallied sharply on Donald Trump's U.S. presidential election victory, which may increase the chances of the euro sliding toward 2023's yearly low.

Republicans won the presidency and took control of the Senate, while results for the House of Representatives remained unclear.

If Republicans retain control of the House, Trump would have an easy path to enact much of his policy plans, which could include tariffs and leaving Europe to provide more of the military support for Ukraine, all of which might have a negative impact on euro zone GDP growth.

Wall Street analysts downgraded euro area GDP estimates and lowered ECB terminal rate forecasts due to Trump's policy agenda.

European equity markets DAX, IBC sank on the prospect of lower growth.

The dollar's yield advantage over the euro increased sharply and may extend should the House remain under Republican control.

German-U.S. spreads (US2DE2=RR) traded their widest since December 2022 while Fed (SRAM26) and ECB (FEIZ5) terminal rate spreads blew through the wide hit Oct. 28 and traded to fresh wides of -183bps.

April's 1.060125 EBS monthly low is now in focus but EUR/USD bears may have their sights set on 2023's 1.0448 EBS low.

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