MarketsDec 18, 2024
Investors See Dollar Strength Continuing Into 2025 After Stunning Rally Against Global Currencies — But Trump Might Not Want That
Forex Forecast
Noah Weidner
Discover
Investors may think “cash is trash” as they move to equities, but one thing is clear: the US dollar is once again on the rise. The only problem? Its growth comes at the expense of global trade and economic stability.
Where the dollar goes, it brings doom: President-elect Donald Trump has all but committed America to a trade war, with tariffs targeting key trading partners — China, Mexico, and Canada. Investors aren’t waiting for him to make good on his promises when he takes the Oval on Jan. 20. Combined with slower Fed interest rate cuts, the Dollar Index has climbed more than 7% in the past three months — with power expected to continue into 2025.
Axios reports that these expectations are forcing global central banks to reassess their strategies, clouding economic outlooks — and potentially risking a reacceleration of global inflation. But in the US, independent of concerns about trade policies and deportations reigniting inflation and inducing slower growth, over half of major banks polled by the Financial Times — including Goldman Sachs and Morgan Stanley — forecast that the dollar will increase further next year.
Self-sabotaging behavior: While Trump has criticized the USD for putting “undue pressure” on the economy, his policies might push it even higher. His pro-dollar stance has already boosted confidence among publicly traded CEOs. The true impact of these policies on the economy and global markets will become clearer after they’re put into action.
