📝U.S. Growth Projected to Decline In 2025: J.P. Morgan FX Strategy

The main anchors of our bearish USD view remain unchanged and help sift through the barrage of headlines, specifically, US growth moderation; global longs in US equities (or assets), growth-supportive fiscal/ monetary policy outside the US alongside low energy prices; and finally, higher odds of a structural USD weakening which deserves a dollar discount. The direction of travel across these dimensions has remained towards dollar weakening in recent weeks. For instance, US data have shown signs of softening across multiple releases including claims, services PMIs, con- struction and auto sales, even if the payrolls was more mixed, with our economists looking for US growth to slow down the most vs. last year in DM and many countries in EM. Growth is projected to decline in the US and several countries in 2025, but there are several winners as well: Antipodeans, NOK, EUR and JPY in DM and EMEA in EM. This softer data has contributed to a decline in the terminal rate priced for the Fed at the same time that term premium has gone up. A USD-negative cocktail: the terminal rate priced for the Fed has declined simultaneous with term premium going up, a combination that we view as particularly USD-negative. - J.P. Morgan FX Strategy