Morgan Stanley predicts a 9% fall in the USD through 2025

As slowing growth and interest cuts loom, Morgan Stanley is predicting the US$ could fall another 9% in the coming year as investors re-balance away from the US. In the very near-term investors are fleeing due to the uncertainty and continual flip-flopping of tariffs alongside possible increased taxation on overseas holding of US assets

EUR/USD at 1.1400
GBP/USD at 1.3550

This week we have US employment data on Friday - a strong report may decrease the likelihood of interest-rate cuts, but weak numbers will likely nudge the USD lower still. Last week’s Fed minutes showed the Board acknowledging “difficult trade-offs” between inflation and slowing growth.

GBP: No top-tier data releases this week might leave GBP side-lined amongst other currencies. The market is now expecting just one more 0.25% rate cut in 2025 from the Bank of England, which is supporting the currency and pushing GBP/EUR resting at 1.1850 and GBP/USD to 3yr highs.

EUR: Important inflation data on Tuesday after Monday’s key speech from President Lagarde will give the market more insight into the future path of EU interest rates and the Central Bank’s feeling for growth & stability across the EU. Friday is a big day with data being released for regional GDP, employment and Producer inflation

Thursday’s interest rate decision will likely see a 0.25% cut in rates hoping to spur growth - this is already priced into the market.

Monday:
US: Manufacturing data / Fed Chairman Powell speech
EU: Lagarde ECB speech

Tuesday:
EU: Inflation data
US: US Fed speeches
AUS: Central Bank minutes released

Wednesday:
AUS: GDP data
CAD: Interest rate decision
USA: Tier-2 employment data

Thursday:
EU: Interest rate decision
USA: GDP data / Employment data
AUS: Trade Balance

Friday:
EU: GDP / Producer price inflation / Retail Sales
US: Key employment data