The euro faced headwinds against a broadly stronger U.S. dollar. The dollar’s strength is attributed to rising expectations of interest rate increases by the Federal Reserve and anticipated fiscal stimulus under the new administration.

Factors Contributing to Euro Weakness

• Dollar Strength: Increased confidence in the U.S. economy and expectations of higher interest rates have fueled dollar demand.
• Italian Banking Concerns: Uncertainty surrounding the health of Italian banks continues to weigh on the euro.
• Monetary Policy Divergence: The European Central Bank’s (ECB) accommodative monetary policy contrasts with the Federal Reserve’s tightening stance, putting downward pressure on the euro.

Analysts suggest that the euro’s weakness could persist in the near term, given the prevailing economic and political uncertainties in the Eurozone.