Trump win a wild card for our weaker dollar forecast

Further out, our base case is that the combination of a generally benign global economic backdrop and a dovish Fed leads to some further US dollar weakness over the next six to twelve months. But given the extent of Fed rate cuts now discounted in money markets, we see limited scope for a further large shift in interest rate differentials against the dollar, at least absent a US recession. Indeed, many Fed easing cycles have actually resulted in a flat or appreciating dollar. On balance, we forecast the DXY index to end this year a little stronger, before falling to ~98 by the end of 2025. The major caveat to that view is the uncertainty around the upcoming US election: our forecasts do not factor in former president Trump’s policy proposals. Should he re-take the White House in November, the dollar would probably rally sharply, at least in the near term, on expectations of higher US tariffs and interest rates.