Deteriorating USD Expected as First Half of Year Records Poorest Performance Since 1973, According to S&P Global
In a recent report, S&P Global has predicted that the US dollar will continue to experience weakness and volatility throughout 2025. This forecast is based on a combination of economic signals, policy uncertainties, and trade dynamics.
The US dollar has already shown notable weakness in the early part of the year, reaching its lowest level since 2022. This decline reflects investor concerns about the US economic outlook and the impact of trade policies, including ongoing tariff uncertainties.
S&P Global's economic research indicates moderated US growth prospects and anticipates softer labor markets and inflation pressures. The Federal Reserve is expected to maintain the fed funds rate around 3.75%-4.00% by the end of 2025, with a neutral rate targeted for 2026, signalling a cautious monetary policy stance that could temper dollar strength.
The dollar's weakness is benefiting international markets, particularly European stocks, as investors rotate out of the dollar and seek diversification. However, ongoing fiscal challenges, trade policy risks, and structural economic issues in the US are expected to keep the currency under pressure in the second half of 2025.
While some speculate about "de-dollarization," analysts emphasise that global dollar demand remains strong, and any sustained decline would require significant shifts in global financial and government balances, making dollar dominance unlikely to erode rapidly.
Trading models project the US dollar index (DXY) to trade near 97-99 in the near term, with some expectations of modest improvement toward 101 in the following 12 months, signalling potential stabilisation but no strong rebound yet.
Meanwhile, in the crypto space, P2P.org has introduced native ETH staking to Ledger Live globally, while Nexo has become the first-ever digital asset and wealth partner of the DP World Tour, launching the Nexo Golf Championship. XRP's price has dipped as a judge has shot down a joint bid from Ripple and the SEC to reduce the company’s previously ordered fine.
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The US dollar's plummeting began after US President Donald Trump took office in January. Elias Haddad, a global macro strategist with Brown Brothers Harriman, believes that the US dollar is suffering from various factors that are likely to cause "structural drag" over the long term. Derek Halpenny, managing director and head of research with MUFG Bank, suggests that uncertainties over the policy outlook, particularly on trade, may have triggered the move.
The US dollar is currently trading at 97.03 on the US Dollar Index (DXY). Despite its current weakness, the dollar continues to play a significant role in global finance, and its future trajectory will be closely watched by investors and economists alike.
In the future, investors might find opportunities in the crypto space as the US dollar's weakness persists, with altcoins like ETH, XRP, and others potentially gaining more attention. Meanwhile, the blockchain technology underpinning cryptocurrencies, such as DeFi protocols on Aptos and Solana, continues to evolve and power AI applications.
