The US dollar experienced significant fluctuations in early 2025, with a notable decline of nearly 11% from February to April, marking the fourth largest drop since the Plaza Accord in 1985. Despite this, the dollar had previously seen a remarkable bull run, gaining 53% in nominal effective exchange rate terms over an 11-year period up to 2022. Currently, the dollar remains overvalued by approximately 15-16% above its long-term average in real effective exchange rate terms, indicating a sustained period of depreciation is overdue.

In this video, Derek Halpenny, Head of Research, Global Markets EMEA & International Securities, discusses the implications of the US slowdown and the Federal Reserve's likely recommencement of monetary easing later this year. He also explores the Trump administration's focus on closing large trade deficits and the potential impact of a weaker dollar on achieving this goal.

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Key points

  • 0:22 - The recent sell-off of the US dollar was significant. What are the implications?
  • 1:16 - What fundamental factors will help drive the dollar weaker?
  • 3:02 - Is this US dollar depreciation view all US-specific and Trump-induced?

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