Wells Fargo forecast lower USD through to 2025

Wells Fargo has updated its currency market forecast, predicting a more gradual depreciation of the U.S. dollar over the medium term than previously anticipated. The bank now expects a moderate decline in the dollar's value through much of 2025.

The projection is based on the expected slowdown in U.S. economic growth and a prolonged phase of monetary policy easing by the Federal Reserve.

The report noted that certain currencies, such as the yen and the Australian dollar, may outperform the U.S. dollar in the coming year. Wells Fargo's analysts suggest that these currencies could gain if global financial conditions remain favorable. The bank also noted that this environment would likely favor currencies from emerging markets, which tend to be more responsive to shifts in risk perceptions.

Wells Fargo's analysis also identified political and policy developments as potential risks. The bank noted that scenarios emerging from the U.S. elections could include more expansionary fiscal policies and higher tariffs.

If these events were to materialise, the U.S. dollar could remain stronger for a longer period than currently projected by Wells Fargo's analysts.

The bank's currency forecast is carefully observed by investors and policymakers to gauge the performance of major currencies against the U.S. dollar. Fluctuations in the dollar's strength or weakness have significant effects on international trade, investment flows, and the pricing of commodities and other assets.

While Wells Fargo still anticipates a moderate depreciation of the U.S. dollar over the next few years, it has revised its outlook to reflect a slower pace of decline.

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