Dollar set for steepest annual decline in eight years
The dollar is heading for its sharpest annual retreat in eight years as investors anticipate further declines if the next Federal Reserve chair implements more interest-rate cuts.
The Bloomberg Dollar Spot Index has fallen 8.1% in 2025. The greenback initially tumbled following Donald Trump’s "Liberation Day" tariffs in April and has faced continued pressure as the president campaigned to install a dovish appointee as the next Fed chair.
Markets appear to be pricing in at least two rate reductions for 2026, creating a divergent policy path from other developed economies that diminishes the dollar’s attractiveness to investors.
The euro has strengthened against the dollar, supported by controlled inflation and anticipated European defense spending increases that have kept rate-cut expectations minimal. Meanwhile, traders in Canada, Sweden and Australia are betting on interest rate increases.
Attention remains focused on who will replace Jerome Powell when his term as Federal Reserve chair concludes in May.
Source: Reuters.com
