The US currency has got off to a running start this year, buoyed by America’s economic hegemony. The figures speak for themselves. The US represents just 4% of the world’s population but 25% of global GDP, 31% of global household wealth, 46% of global investment in venture capital, 65% of the world’s stockmarket capitalisation and even 75% of the benchmark global index: the MSCI World Index (a 55-year high). All this fuels the US dollar’s attractiveness.
This looks set to be a difficult year for the eurozone. The EUR/USD hit a two-year low at the start of the month and it could fall further in the short term. This is not a surprise for anyone. The euro’s depreciation is a sign of the monetary union’s inexorable economic and financial distancing from the US. On the other side of the Atlantic, growth is forecast to exceed its potential at around 2% in 2025 after reaching 2.5% in 2024. The eurozone will grow by 1% at best this year. This figure may be revised down in view of the German recession and French political turmoil that is set to be a drag on consumer spending and investment in the country. And Europe is also struggling to stand out in terms of the yield on financial assets. All this is an incentive to seek refuge in the dollarhe medium term.
For almost nine years, this pair managed to stay in a consolidation phase. But it may exit the range shortly if the EUR/GBP falls below 0.8270 for an extended period. This is no longer very far away.
It has been an excellent start to the year for the US dollar. Sterling reached its lowest point against the dollar since May 2024 on 2 January. In all likelihood, the UK currency’s depreciation is only just beginning. One of our deepest convictions for 2025 is that the US will remain strong and overvalued against the other leading currencies.
Unlike many analysts, we expect the CNH to be broadly stable this year. The yuan has depreciated much less than other Asian currencies since the Fed began its rate-cutting cycle. What’s more, China does not really need its currency to depreciate in view of the export boom. Stability is likely to be the watchword in 2025.
The market consensus expects the Swiss franc to remain strong in 2025, with a EUR/CHF pair moving around 0.92. This is also our opinion. Be aware that the Swiss National Bank may be tempted to re-introduce negative interest rates, a subject that has been on the table since the end of 2024.
The EUR/CAD is on an underlying downward trend. If the support level of 1.4720 is breached, the pair’s depreciation will probably accelerate. Watch out.
The EUR/AUD has been unusually volatile at the start of this year. On 2 January, the EUR/AUD jumped to 1.6800, a de facto resistance zone. The pair than plunged rapidly by 220 pips. In the very short term, we expect the EUR/AUD to be fairly stable at around 1.65. But this is just a pause. The downward trend is likely to resume shortlyt than anticipated.
Technical analysis is useful sometimes to understand trends in the currency market. This is the case today for the EUR/JPY pair. The six-month chart clearly demonstrates an upward trend in anticipation of the Bank of Japan’s future rate hike. Be aware that this may be implemented a little later than expected, in March rather than January.
Over both the short and long terms, the euro has always tended to outperform the HUF. This has been the case year-to-date, with a gain of 0.93%. The year-on-year appreciation is even more pronounced at around 10%. We expect the euro to continue on its upward path in 2025 and our objective of 420 for the EUR/HUF pair could be reached by the end of the quarter.
At the start of this year, the dollar’s appreciation appears impossible to stop. On the first trading day of the year, 2 January, the dollar index reached a 26-month high. We think this is only the beginning. Uncertainty surrounding China’s economic situation, the inflation trajectory and geopolitical risk are likely to play in favour of a strong dollar in the short term, especially against the currencies of emerging Europe
| DATE | CURRENCY | EVENT |
| 15/01 | USD |
US consumer prices |
| 17/01 | CNY |
GDP in Q4 2024 |
| 27/01 | EUR |
German IFO index |
| 28/01 | HUF |
central bank meeting |
| 28/01 | CNY |
Start of the Chinese New Year |
| 29/01 | USD |
central bank meeting |