Synopsis:

ING advises a straightforward approach to USD strength in 2025, forecasting that the new administration’s policies—looser fiscal stance, tighter immigration, and protectionism—combined with relatively high US rates, will fuel a dollar rally. Despite potential market wobbles, ING expects a robust USD trend, possibly breaking the dollar index’s two-year range.

Key Points:

• Policy-Driven USD Strength: The combination of fiscal expansion, immigration restrictions, and protectionist measures under the new administration makes a strong case for sustained USD strength.

• Higher US Rates: With US rates expected to remain elevated relative to other G10 currencies, the yield advantage should further support the dollar.

• Market Positioning and Setbacks: ING acknowledges potential temporary setbacks due to market positioning or speculation on USD policy, but views these as brief interruptions in a broader uptrend.

• Dollar Bubble Potential: ING warns that while the USD rally could overheat the economy, 2025 is likely to see the dollar index break its current range, driven by structural policy factors.

Conclusion:

ING recommends a straightforward bullish outlook on the USD for 2025, driven by supportive fiscal, immigration, and protectionist policies alongside higher US rates. The firm expects any dips to be short-lived within a broader upward trend, potentially pushing the dollar index to new highs.