Global Forex Monitor - June 2025

After a bout of weakness in March and April, the DXY dollar index stabilised at around 99 and briefly rebounded to almost 102 in May, buoyed by a truce in the trade war between the United States and China. However, this trend was quickly thwarted by Trump's announcement of a doubling of tariffs on steel and aluminium, as well as the threat of 50% tariffs on European goods, all of which continues to create economic uncertainty that could be harmful to US growth. At the same time, concerns are emerging about the deterioration in the US public deficit, exacerbated by the ‘Big Beautiful Bill’, as this budget proposal could increase the national debt by $3,000bn over ten years.In this context, we remain negative on the US dollar in the run-up to 4 July, the date on which the ‘Big Beautiful Bill’ could be voted through the Senate, and 9 July, which is when the suspension of reciprocal customs tariffs is due to end. Given the small number of trade agreements signed so far (other than the one with the United Kingdom), it is highly likely that there will be a further postponement. In addition, the first signs of a slowdown in US economic activity should also contribute to the US dollar's weakness, being likely to lead to deeper rate cuts by the Fed than what is priced in by the market.After appreciating sharply in March and April, the EUR/USD marked a pause in May, reaching 1.14 in early June after hitting a low of 1.108 on 13 May when the US-China trade truce was announced. However, the euro went on to rebound on the back of a US dollar weakened by persistent trade uncertainties (threat of 50% tariffs on European goods). Although penalising for the European economy, all these announcements of US tariffs have had a rather negative impact on the US dollar, as they increase mistrust of the United States. The euro is also being supported by some reallocations in favour of the euro at the expense of the US dollar. Therefore, we remain positive on the EUR/USD, which could appreciate to 1.18 by the end of 2025.