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The US dollar surged in value following the recent US election, but this upward trend may not last, according to new economic forecasts from Desjardins Bank.
Experts at the bank suggest that the dollar's gains could be temporary, particularly if proposed tariffs are not implemented until 2025 or 2026.
This delay could provide a period of relief for the global economy. Furthermore, if US companies accelerate foreign purchases to preempt the tariffs, this could bolster other currencies against the dollar.
Another factor potentially contributing to exchange rate volatility is the shifting landscape of monetary policies.
Desjardins Bank predicts that the US economy will struggle to sustain its current growth rate, leading the Federal Reserve to implement multiple interest rate cuts. This more cautious approach is anticipated in response to the Trump administration's measures, which are expected to fuel inflation.
"If tariffs don’t take effect until late 2025 or even early 2026, the global economy could enjoy a temporary reprieve. And if US companies decide to get ahead of tariffs by making foreign purchases before the levies are applied, several countries could end up reaping the economic benefits. This could give many currencies a momentary boost against the US dollar," says Jimmy Jean, Chief Economist and Strategist at Desjardins.
"But the skies over many currencies would cloud over once again before the end of 2025 in anticipation of more challenging times in 2026," he adds.
