BofA sees stronger dollar in 2025, euro and franc to lag

Bank of America analysts revised their long-term forecasts for the U.S. dollar, now anticipating a stronger performance through the end of 2025. The revised outlook comes after the U.S. election results, which prompted a shift in consensus among currency forecasters.

Previously bearish on the U.S. dollar for the remainder of 2024, the consensus has now shifted to a more bullish stance.

The year-end median consensus forecast for 2025 now predicts only a modest rise in the EUR/USD to 1.05, contrasting with the 12-month EUR/USD forwards average of 1.0679 observed over the past month.

Similarly, the consensus does not expect significant movement in the USD/CHF , maintaining a steady forecast of 0.90 throughout 2025, whereas the 12-month forwards to buy USD/CHF have been trading around 0.8560.

This outlook revision follows speculative narratives that emerged before the U.S. election, suggesting the EUR/USD could reach parity in the event of a Republican victory.

Bank of America points to historical patterns, such as the first Trump presidency, where the three-month EUR/USD risk reversal reached its widest level in February 2017 following Inauguration Day.

According to the analysts, the current market conditions and historical analogs suggest that the U.S. dollar rally has potential to continue into 2025, and they believe it is worth considering hedges at the current price levels to prepare for this scenario.

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Source: Investing.com