The outlook for the US dollar in 2025 is bright. According to Claudio Wewel, FX Strategist at J. Safra Sarasin, the dollar’s current strength is expected to persist. Its yield advantage over other G10 currencies and the cyclical outperformance of the US economy will support its rise, with significant implications for global markets.
Dynamics shaping the dollar in 2025
During the first half of 2025, the dollar will benefit from limited room for interest rate cuts in the US, while weaker growth dynamics outside the US allow other G10 central banks to implement further cuts. Additionally, tariff policies from the Trump administration could increase exchange rate volatility, significantly affecting currency pairs.
Although tariff threats may serve as a negotiation tool, their impact will vary based on trade dependency and negotiation power. European economies may be more vulnerable, but a potential trade agreement between the EU and the US could offset negative effects.
Euro, pound, and yen: diverging trajectories
The euro remains under pressure due to weak growth, particularly in manufacturing. A modest recovery might occur in the second half of 2025, though structural issues like French public debt will continue to weigh it down. The British pound will initially benefit from the UK budget but is exposed to a retracement due to its high valuation. The Japanese yen could gradually strengthen as the BoJ’s monetary policy leans hawkish amid sustained growth and inflation above target.
Gold and silver: shining opportunities in 2025
The outlook for gold remains strong, bolstered by emerging market central bank purchases and the ongoing weakness in China’s real estate sector. Silver may outperform due to its role in advanced technologies like artificial intelligence, making it an attractive investment choice.
