Marcus Ashworth is a Bloomberg Gadfly columnist covering European markets. He spent three decades in the banking industry, most recently as chief markets strategist at Haitong Securities in London.

If Donald Trump could trigger a global bond selloff, wait till you see what he does to the euro. The greenback is already in the midst of its longest winning streak against the common currency since its debut in 1999, and is now at the highest level in about a year. Get ready for a sustained shift weaker as the currency finally breaks its extraordinary resistance to economic reality.

This divergence between the U.S. and Europe was amply illustrated by the different tacks taken by Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi in the same 24 hours at the end of last week. Yellen all but confirmed a rate hike is coming Dec. 14th -- barring a meteor strike.

She has in her sights the inflationary impact from President-elect Trump's $1 trillion infrastructure plans and a drive to lift the U.S. economic growth rate to 4 percent. The prospect of a huge pickup in spending is enough to spark a sustained rally in the dollar. That's created trouble for the euro. Meanwhile, Europe's persistent inability to engender a recovery eight years on from the financial crisis is only going be exposed further by a potential resurgence of American growth.

European Growth Vacuum
Trump infrastructure plans set to power U.S. growth ahead of Europe
Source: Bloomberg

It's a different story for Draghi, who admitted that Europe's recovery isn't strong enough yet for a sustainable return of inflation, and the current monetary support will be a "key ingredient" for years to come. That suggests that there will be an extension, if not an expansion as well, of the central bank's bond purchase program from the scheduled end date of March. So much for ECB tapering in the near future. To top it off, there's no evidence of a concerted plan to focus on fiscal stimulus. 

Another source of currency pressure comes from Trump's mooted multinational tax repatriation deal, which would allow a one-off amnesty, at a heavily subsided corporate tax rate, for American-headquartered firms to move their overseas earnings back onshore to the U.S. Cue companies selling euros and buying dollars. 

The risk here, unless carefully handled, is that this could become an unseemly charge as the foreign exchange market tries to front run the likes of Apple Inc. or Microsoft Corp. repatriating their vast overseas cash piles.

Euro Support
Recent rout may have limits, given current level's proximity to major support levels
Source: Bloomberg

The selloff doesn't have to turn into a one-way ticket. The current level is $1.0638 per euro, and, looking at the chart above, can be seen to have major support at around $1.05 -- it's been trading around a range from there to $1.16 to since early last year. Conditions are certainly ripe for it to test that support soon. However, there are limits to this.

The history of the Bundesbank can be seen as including an insistence on a strong currency as central to the viability of the union. The Germans would surely insist that Draghi and the rest of the ECB take action to prevent excessive weakening.

Even that may not be enough. Italian Prime Minister Matteo Renzi may be on track to lose a December referendum on constitutional reform, and were that to happen, the uncertainty that may result could be a big drag on the common currency.

So, the euro could yet return to levels seen when it first came into being. Seventeen years of running, just to stay in place.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Marcus Ashworth in London at

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Jennifer Ryan at