MacroResearchBoard

The End Of The U.S. Dollar Era? – March 31, 2025

A just-published report updated our global currency strategy, which continues to favor select cyclical currencies over the U.S. dollar (USD) and the currencies of the weak-link economies that are struggling with elevated household debt burdens.

We were positioned for a weaker USD heading into 2025 and expected the euro to recover. From a longer-term perspective, the USD (DXY Index) peaked in October 2022 and, despite this year’s weakness, it remains elevated according to the MRB U.S. Dollar Diffusion Index. Moreover, the USD is historically expensive at a time when its role as the main global reserve currency is being questioned.

The U.S.’ anti-global and protectionist actions, as well as the evolution of the global economy, have increased the prospects for a profound change in the global trade and monetary systems. Meanwhile, the relative growth outlook for the euro area has improved because German policymakers are now finally stepping up their fiscal spending efforts in a major way. Remain overweight the euro (and the yen) versus the U.S. dollar and weak-link currencies.

Within the weak-link currencies, we favor those that will benefit from the revival of the euro area economy, i.e. the Norwegian krone, Swedish krona and U.K. pound.