World markets experienced significant fluctuations on August 14, with Bitcoin reaching new peaks, oil prices rising, and Asian markets experiencing decline.
U.S. Dollar Outlook for 2025: Mildly Bearish to Sideways
The U.S. Dollar Index (DXY) is projected to have a bearish to sideways trend in 2025, according to various forecasts. In the second half of 2025, the DXY is expected to hover between 95 and 99.
This softness in the dollar is largely attributed to expectations of multiple Federal Reserve rate cuts and broader macroeconomic factors affecting U.S. monetary policy and capital flows. However, safe-haven flows could provide intermittent support, potentially shifting momentum unexpectedly.
In Q3 2025, the DXY is expected to hover around 97–99, with a mild bearish bias as markets await clearer Fed signals and contend with rising inflation risks. As we move into Q4 2025, a bearish bias is expected with the DXY drifting down to 95–98, reflecting the anticipated Fed rate cuts.
Some data offers a slightly more optimistic near-term forecast, suggesting a rise to 101-103 in late 2025 and early 2026. However, these longer-term projections are model-based and subject to typical forecasting error.
The weakening USD trend has implications for global currencies. The EUR/USD is projected to strengthen, climbing from about 1.17 in 2025 toward 1.31 by 2026 and possibly reaching 1.37 by 2030. The GBP/USD is forecasted to hover around 1.29 in 2025 and strengthen slightly in 2026, before weakening in later years. USD/JPY is expected to weaken somewhat over 2025-2027 from a high near 150 toward 128 by 2030. USD/CAD is likely to decline modestly, averaging around 1.39 in 2025 and moving slightly lower in subsequent years.
A softer USD could relieve some pressure on emerging market currencies and reduce input costs priced in dollars. Conversely, USD depreciation typically raises commodity prices, potentially adding inflationary pressure in non-U.S. countries. Currency volatility is expected to remain elevated with global growth and commodity price dynamics creating complex cross-currents in the forex market.
In summary, through 2025 and beyond, the U.S. Dollar Index is broadly expected to trend lower or remain subdued, driven by Fed policy shifts and macroeconomic factors. This outlook is sensitive to economic data surprises, geopolitical risks, and safe-haven demand fluctuations that can cause intermittent USD strength.
Meanwhile, global stock markets have shown mixed performance. The DAX, CAC 40, and Euro Stoxx 50 showed moderate growth on positive company data and positive economic signals. Kazakh officials reported a 6.3 percent increase in GDP. The price of October Brent crude futures increased by 1.26% to $66.46 per barrel. Gold's price fell by 0.66% to $3,385.62 per ounce due to the expectations of the Trump-Putin meeting. The Hang Seng and Shanghai Composite indices declined due to investors' expectations of deflation in China, weak corporate results, and pressure on the technology sector.
Economist Zhanybek Aigazin views this GDP figure with caution. Bitcoin reached an all-time high of $124,400 but subsequently retreated to $118,250 due to renewed inflation concerns following the release of U.S. producer price index data. The FTSE 100 (UK) showed a slight decline despite the UK's GDP growth exceeding expert expectations. The U.S. Dollar Index initially showed a decline but later regained its footing, rising by 0.33 percent. The Dow Jones index increased by 1.04%, the S&P 500 by 0.32%, and the NASDAQ by 0.14% due to expectations of a Federal Reserve interest rate cut in September. The price of September WTI crude futures rose by 1.35% to $63.50 per barrel. The Nikkei 225 index decreased by 1.45% due to the decreased attractiveness of Japanese exports amid the strengthening yen.
Investors in the stock-market might find opportunities amid mixed performance globally, as the DXY, projected to have a bearish to sideways trend in 2025, could impact broader finance operations including currency fluctuations. Consequently, the finance industry could see volatility in emerging market currencies and commodity prices due to the weakening US Dollar trend. A softened dollar might provide relief for emerging market currencies and reduce input costs priced in dollars, yet it could also potentially increase non-U.S. inflationary pressure due to raised commodity prices.
