Bank of America analysts have revised their long-term forecasts for the US dollar, now expecting stronger performance through the end of 2025. The revised forecast comes after the US election results caused a shift in consensus among currency forecasters.
Having previously been bearish on the US dollar until the end of 2024, the consensus has now shifted towards a more bullish stance.
The median year-end consensus forecast for 2025 now forecasts only a modest rise to 1.05, in contrast to EUR/USD’s 12-month forward average of 1.0679 seen last month.
Likewise, consensus does not expect USD/CHF to move significantly, maintaining a steady forecast of 0.90 through 2025, while 12-month USD/CHF forwards are trading around 0.8560.
This forecast revision follows speculative narratives emerging ahead of the US elections suggesting that EUR/USD could reach parity if the Republicans win.
Bank of America points to historical patterns, such as Trump’s first presidency, when the three-month EUR/USD risk reversal reached its widest level in February 2017, after Inauguration Day.
According to analysts, current market conditions and historical peers suggest the US dollar rally has the potential to continue into 2025, and they believe it is worth considering hedging at current price levels to prepare for this scenario.
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