Market Outlook: The Dollar Expected to Strengthen in the First Half of 2025

According to MUFG, the dollar is expected to strengthen in the first half of 2025 due to the likelihood of President-elect Trump's rapid implementation of customs tariffs and the limited probability of the Federal Reserve lowering interest rates. MUFG currency analyst Lee Hardman stated, “Further front-loaded tariff increases support our expectation that the US dollar will strengthen even more in the first half of this year. The Fed signaled very clearly in December that it would be much more cautious about making any further rate cuts this year. In contrast, other major central banks are expected to continue lowering their interest rates.” Hardman emphasized that this divergence could encourage a stronger dollar in the near term.