2025/10/07

FX Insights 4Q 2025 – After the fall: the USD’s new phase

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The USD saw its sharpest first-half drop since 1973, marking the end of a major re-positioning phase and the start of a consolidation stage. Despite resilient US growth and strong equities, policy uncertainty, fiscal imbalances, and lingering stagflation risks continue to weigh on the outlook. The USD’s safe-haven status has eroded, prompting investors to maintain US assets while increasingly hedging currency exposure.

The EUR remains the main diversification alternative, supported by stronger EU spending and higher rate expectations. The JPY may stabilize after political shifts and the GBP faces fiscal challenges despite tariff relief.

In the Emerging Markets block, the CNY remains constrained by structural weaknesses. High carry still supports the TRY and Latin American currencies, though positioning risks are growing ahead of elections, notably in Argentina. Overall, the USD is entering a recalibration phase, one of moderation and selective opportunities across global FX markets.

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