ECB/Wunsch: Weak Euro May Mitigate the Impact of Trump Tariffs

Forex - European Central Bank (ECB) member and Governor of the National Bank of Belgium, Pierre Wunsch, stated that a weak Euro, which has fallen to parity with the US dollar, will increase inflation but will help mitigate the impact of new US tariffs on growth in the Eurozone.
In an interview at the Reuters Global Markets Forum, Wunsch mentioned that four more ECB rate cuts next year are a "meaningful" scenario, but he is open to pursuing a different path if inflation and growth data require it.
The ECB lowered rates last week due to a more gloomy outlook, and policymakers indicated that with the newly elected President Donald Trump's administration imposing new tariffs on Eurozone imports, the bank's already low growth forecasts may prove overly optimistic. However, Wunsch noted that a lower Euro exchange rate against the dollar would help remove the constraints of a protectionist shift in US trade policy.
“We’ve already seen the Euro depreciate by maybe 4 or 5 percent against the dollar,” said Wunsch, adding, “Thus, a 10 percent tariff could essentially be compensated if the Euro reaches parity.”
On the other hand, Wunsch warned that a weaker currency could lead to higher inflation by making imports more expensive.