Francesco Pesole

Global markets are settling into core trades of a firmer dollar, higher US equities and higher terminal rate from the Fed

Donald Trump and the Republican party will control all the levers of US power in January. FX markets think they know what’s coming. In this quick take on the Global FX market in 2025, we share our big calls on the trends which will dominate the developed and emerging market FX space

Markets were quick to buy USD after a minor correction as US CPI was released yesterday. This move might reflect expectations for the coming year, as a USD-positive policy mix under Trump is likely to drive sustained bullishness for the dollar. In the near term, the positioning picture points to a deeper USD correction, but that may also be short-lived

It’s pretty much been one-way traffic for the dollar since it became clear that the Republican party was going to win a landslide victory in the US. Investors and corporate treasurers think they know what Donald Trump will mean for the dollar, having seen this film before in 2018-2019. European FX in particular looks the most vulnerable

The dollar remains at risk of positioning-led corrections, but so far macro data and Fed communication have not offered any USD-negative catalyst. Yesterday, Fed Chair Powell emphasised the economy’s strength and endorsed market caution on pricing in more cuts. EUR/USD may hold above 1.050 for now, but the general direction still appears bearish

In this podcast, a replay of our live webinar, ING’s FX strategists Chris Turner, Francesco Pesole and Frantisek Taborsky discuss how Donald Trump’s policies will reshape global currency markets in the year ahead

We are entering a period of calm in US macro news. This means that it’s mostly up to any positioning readjustment to keep the dollar from rallying further. Growing focus will be on the eurozone and PMIs, where any soft read can be the ultimate trigger for a break below 1.05. Elsewhere, UK CPI should not lead to a Bank of England December cut

FX markets continue to consolidate after recent volatility, but no one wants to unwind their long dollar positions. Equally, the threat of escalation in Ukraine plus more soft European PMI numbers tomorrow is keeping the euro subdued. We can’t see this position changing today. In the EM world, look out for rate meetings in Turkey and South Africa

Image source: Pixabay The Central Bank of Turkey kept rates on hold at 50% at its November rate-setting meeting, in line with consensus.

We look at which developed currencies are misvalued according to our medium term real Behavioural Equilibrium Exchange Rate (BEER) model. The yen’s undervaluation is currently the biggest standout, arguing for long-term recovery. EUR/USD is moderately cheap (5%) at current levels, but would look stretched on the undervaluation side at parity