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Investing.com -- Standard Chartered (StanChart) revised its forecast for the US dollar, anticipating a weaker performance than previously expected.
The Asia-focused bank now projects that the EUR/USD exchange rate will reach 1.16 by the end of the second quarter of 2025, up from its earlier forecast of 1.06, and will maintain that level through the end of 2025, an increase from the prior estimate of 1.04.
According to StanChart, this revision reflects a broader trend of dollar weakness against other G10 currencies. The bank also indicated a moderate "risk-on" bias for G10 currencies, suggesting that higher-beta currencies might outperform safe havens in the upcoming months.
StanChart’s baseline expectation is that the dollar will be slightly weaker compared to its current spot but will remain essentially stable through the end of the year. Despite recent positive developments from the U.S. administration regarding tariffs and encouraging equity market gains, the dollar has not shown significant strength.
This leads the bank to believe that the adjustment in dollar positions is ongoing and could result in a further decline in the dollar’s value.
The bank also acknowledges uncertainty surrounding its baseline forecast. It notes that President Trump has an incentive to maintain a stable policy environment as the new fiscal package becomes a focal point. Trump may aim for quick tariff deals to support the argument that tariff revenues will positively contribute to the projected revenues in the upcoming fiscal bill.
Economic advisors are likely cautioning that adding a risk premium to U.S. assets could be detrimental without offering any benefits.
StanChart suggests that if the unwinding of aggressive policy takes precedence, the dollar could see an appreciation beyond the bank’s current baseline projections.
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