Dollar Falls as Yen Swiss Franc and British Pound Strengthen

The U.S. dollar fells on Monday, lifting the Japanese yen and the Swiss franc as investors moved away from U.S. assets due to Donald Trump’s policies. JPMorgan Chase & Co. expects this trend to continue over the coming quarters. The Dollar Spot Index dropped 0.5%, extending its annual loss to 7%, pressured by stalled trade negotiations and a weak manufacturing report.

Forecast of Sustained Dollar Depreciation

Meera Chandan, co-head of global FX strategy at JPMorgan, stated that a “second wave of dollar depreciation” is expected to unfold over several quarters. Since Trump’s return to the White House on January 20, another dollar index has fallen about 9%, on track for the steepest drop within the first 100 days of a president since 1973.

Hedge Funds Increase Bets Against the Dollar

Speculative investors, including hedge funds and asset managers, boosted their short positions in the dollar as of April 22, according to CFTC data. This marks the highest level of net short positions since September 2024, suggesting that downward pressure on the dollar could persist.

Trump’s Policies Weaken American Exceptionalism

Chandan warned that Trump’s trade and immigration policies are undermining the “American exceptionalism” that had previously supported financial markets. The erosion of traditional growth drivers and negative real rates due to inflationary tariffs further exacerbate concerns over the dollar.

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Euro and Pound Benefit from Dollar Weakness

The euro has risen more than 10% against the dollar so far this year, and JPMorgan has raised its forecast for the common currency to $1.20 by the end of 2025. The British pound has also strengthened, overcoming fears of UK rate cuts as capital shifts away from the U.S.

Goldman Sachs Supports Stronger Pound Outlook

Goldman Sachs maintains a bullish stance on the pound, projecting it will reach $1.39 over the next 12 months, a level not seen since 2021. This confidence is based on the UK’s limited exposure to U.S. tariff impacts and the broader strengthening of European currencies.

Improved UK-EU Relations Could Further Boost the Pound

Optimism about improving economic ties between the United Kingdom and the European Union is also supporting the pound. A defense summit in London on May 19 could lay the groundwork for a new phase of post-Brexit cooperation, boosting British business investment and favoring the currency.