As America prepares for the return to office of a previous president, the foreign exchange market is preparing for a rare event of its own: The parity between the dollar and the euro.

That is likely to follow Donald Trump’s inauguration later this month, according to strategists at banks including Bank of New York Mellon Corp and Mizuho.

The common currency has fallen more than 7% against the dollar since late September and last week touched $1.0226, its lowest level in two years. Bid markets suggest about a 40% chance of the two currencies hitting parity this quarter, and trading in contracts targeting that level increased last week.

Markets await the aftermath of Jan. 20, the day Trump is sworn in as president. BNY and Mizuho expect Europe to be a “victim” of a potential trade war and that differing growth expectations between Europe and the US could lead to a dollar rally rarely seen in two decades. Both see a move in the rate just this month.

“We’re not far off, so it could happen very quickly,” said Geoffrey Yu, senior strategist at BNY, who sees the euro’s decline peaking near the Federal Reserve and European Central Bank meetings in late January. “Parity is inevitable.”

Since the euro was created in 1999, it has traded at par with the dollar only a handful of times. The last time was in 2022, after Russia’s full-scale invasion of Ukraine sparked an energy crisis in Europe and fears of a recession.

Concerns about energy supply and security remain, with last week’s disruption of the flow of Russian natural gas to Europe via Ukraine a reminder. However, a rise in energy prices is unlikely to concern European monetary policymakers, said Jordan Rochester, head of EMEA macro strategy at Mizuho.

Europe’s export-oriented economies now face the threat of US trade tariffs and expectations that the European Central Bank will have to cut interest rates significantly, contrary to the Fed’s approach. Political instability in the bloc’s biggest economies is adding to the pressure.

“Sentiment couldn’t be worse,” said Antony Foster, head of G-10 FX spot trading at Nomura, who sees January 20 as a potential catalyst for further euro falls if Trump “unleashes” tariffs immediately after his inauguration.

While the euro rallied this week amid a broad drop in the dollar and there were reports of investors “compromising” currency bets, other major banks such as JPMorgan Chase & Co say the level could still be reached this quarter. Wells Fargo sees the threshold as more likely to be reached in the second quarter.

For Jane Foley, chief currency strategist at Rabobank, much depends on whether markets get further confirmation of benign inflation trends to support a more “aggressive” pace of ECB rate cuts. Eurozone inflation accelerated last month, supporting the European Central Bank’s gradual approach to cutting interest rates.

The ECB is expected to cut its deposit rate to 2.75% at its next meeting. The Fed is expected to keep interest rates in the 4.25% to 4.5% range, underscoring the growing divergence in its monetary policy. BNY’s monitoring of assets above $50 trillion shows the euro at its most subdued in two decades.

“How can anyone be optimistic about the euro?” Nomura’s Foster wondered.