StanChart Revises US Dollar Forecast: A Weaker Outlook

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StanChart’s Updated Dollar Forecast

Standard Chartered, a bank with a significant presence in Asia, has adjusted its predictions for the US dollar, now anticipating a weaker performance than previously expected.

The bank projects that the EUR/USD currency pair will climb to 1.16 by the conclusion of the second quarter in 2025. This revised outlook is an increase from their earlier forecast of 1.06. Furthermore, they expect the pair to maintain this level until the end of 2025, marking an upward revision from their prior prediction of 1.04.

Trends and Influences on Dollar Weakness

According to StanChart, this update reflects a broader trend of the US dollar weakening against other G10 currencies. The bank also identified a moderate “risk appetite” bias for G10 currencies, indicating that currencies with higher beta could potentially outperform traditional safe havens in the upcoming months.

StanChart’s primary expectation is for the dollar to exhibit slight weakness compared to its current spot level, remaining fundamentally stable through the year’s end. Despite positive signals from the US administration regarding tariffs and promising equity market gains, the dollar has not shown significant strength.

Potential Impacts and Uncertainties

This scenario leads the bank to believe that ongoing adjustments in dollar positions could result in further depreciation of the currency. However, the bank also acknowledges uncertainty surrounding their forecast. They note that President Trump may aim to maintain a stable policy environment as new fiscal initiatives are spotlighted. Quick tariff agreements could bolster his argument that tariff revenues will positively impact projected fiscal revenues.

Economic advisers might caution that introducing a risk premium to US assets could be harmful without clear benefits. StanChart suggests that if a rollback of aggressive policies becomes a priority, the US dollar might appreciate beyond their current projections.