Bank of America Predicts Stronger Dollar in 2025, Euro and Franc Likely to Lag
Bank of America has recently revised its long-term forecasts, now predicting a stronger performance for the U.S. dollar throughout 2025. This shift in outlook comes after the U.S. election results, which led to a change in the consensus among currency forecasters. After being bearish on the dollar for much of 2024, market sentiment has now turned more bullish. The updated year-end median consensus for 2025 anticipates only a modest rise in the EUR/USD exchange rate to 1.05, compared to the 12-month forwards average of 1.0679 observed in recent months. Similarly, the consensus for USD/CHF remains steady at 0.90 throughout 2025, even though the 12-month forwards average has been trading closer to 0.8560.Bank of America’s analysts attribute this revision to historical market patterns and current market conditions. They point to precedents like the first Trump presidency, where the EUR/USD risk reversal widened significantly following the inauguration. Given these analogs, the current market environment suggests that the U.S. dollar rally could extend into 2025. With this potential in mind, the bank advises investors to consider hedging strategies at current price levels to prepare for any future dollar strength.
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