Greenback outperformance to proceed, however run will cool as coverage uncertainty fades

Investing.com — The greenback will seemingly proceed to outmuscle its G10 rivals within the months forward, supported by financial power, earlier than turning decrease within the again half of 2025 as buyers reassess the election influence and the Fed delivers extra price cuts, analysts from BofA stated in a latest word.

“We’re first on the lookout for continued greenback assist for the subsequent a number of months on again of ongoing financial outperformance within the US, as we await additional readability from Washington on plenty of anticipated coverage modifications,” BofA analysts famous. 

The greenback’s trajectory is more likely to shift within the latter half of 2025 because the increase from the pricing in a pro-growth economic system underneath a second Donald Trump administration runs out of street. “Additional out, nonetheless, we see USD power in the end beginning to average this 12 months as properly,” the analysts stated.

They anticipate the greenback to weaken because the market has already priced in expectations for maximalist financial coverage bulletins, whereas many development implications are usually not but factored in.

Whereas the “US exceptionalism” narrative has pushed greenback power, there’s scope for normalization as Washington supplies extra readability on insurance policies, they added.

The analysts’ name for the greenback to melt is based on a softer touchdown for the U.S. economic system subsequent 12 months, with situations paving the best way for additional Fed cuts. The analysts anticipate  this to in the end “jumpstart” a moderation in greenback power throughout the second half of 2025, after buying and selling near present ranges by way of mid-year.