FX markets 2025: US bull in the China shop

From omfif.org

Continued dollar strength and associated pressures on global finance may be the hallmark of 2025 foreign exchange markets, especially the first half of the year, notwithstanding the dollar’s large ‘overvaluation’ and massive current account deficit. The real trade-weighted dollar is extremely strong and getting stronger, though still shy of Plaza Accord-era heights (Figure 1). Given dollar strength and strong relative demand, the US is heading in 2025 towards a huge current account deficit, perhaps pushing 4% of gross domestic product. Financing lofty dollar ‘overvaluation’ and a massive current account ... (full story)