Dollar ends the year with a bang; more to come in 2025?

The FOMC’s hawkish surprise earlier this week has allowed the dollar to break through the top of its post-2022 range, putting it firmly on the front foot going into 2025. With the BoJ and the BoE both striking a more dovish tone, as most other G10 central banks have recently, the growing gap between the still-robust US economy and a weaker outlook elsewhere continues to underpin the greenback’s strength. Our base case is that the dollar will make some further headway next year as the US continues to outperform, the interest rate gap between the US and other G10 economies widens a little further, and the Trump administration brings in higher US tariffs.