Bank of America analysts have updated their long-term projections for the U.S. dollar, now forecasting a stronger performance through the end of 2025. This shift follows recent U.S. election results, which have altered the broader consensus among currency experts.
While previous outlooks were bearish on the dollar for the latter part of 2024, sentiment has now turned more optimistic. Projections for the euro-dollar exchange rate (EUR/USD) indicate only a slight increase to 1.05 by the end of 2025. This contrasts with the 12-month EUR/USD forward average of 1.0679 recorded over the past month.
Similarly, the dollar-franc exchange rate (USD/CHF) is expected to remain stable at 0.90 throughout 2025. This stands in contrast to recent 12-month forwards for USD/CHF, which have been trading at approximately 0.8560.
The revised outlook comes after speculation tied to the U.S. election, with some narratives suggesting the euro-dollar pair could hit parity if the Republican Party were to secure a victory. Bank of America also pointed to historical trends, noting that during the first Trump presidency, the EUR/USD risk reversal hit its widest point in February 2017, shortly after the inauguration.
Analysts believe current market conditions, coupled with historical parallels, suggest the U.S. dollar could maintain its upward trajectory into 2025. They recommend considering hedging strategies at current levels to prepare for potential further gains in the dollar.
