US Dollar Monthly Exchange Rates Forecast - June 2025

After a steep 7.6% drop in March and April (DXY), the dollar stabilized in May, showing little net movement. Despite this, fundamental pressures remain. Tariffs are driving up import costs, squeezing business margins and consumer spending. The passage of a large federal budget, coming on the heels of a US credit rating downgrade by Moody’s, further dented investor confidence. Heading into H2 2025, the US dollar outlook is weighed down by concerns over trade volatility, labor market softness, and an expected dovish pivot from the Federal Reserve. The US dollar forecast points to continued weakness into 2026, with US dollar predictions centered on sustained depreciation unless policy or economic sentiment shifts meaningfully.

The Canadian dollar briefly slipped above 1.4000 in May before rebounding on improved market sentiment tied to US-China trade developments. However, CAD was still among the weaker G10 performers due to its close ties to US economic risks. Inflation, especially core, remains elevated and has complicated the Bank of Canada’s outlook. While markets still expect one or two cuts this year, confidence is fragile. The USD/CAD outlook remains mixed; gains may be capped by domestic headwinds, even as the greenback weakens. Bloomberg’s US dollar predictions highlight further USD/CAD downside—already at seven-month lows—will hinge on Fed-BoC policy divergence.

The euro outlook is positive heading into H2 2025 following a 9.2% surge in March–April—its best since 2009. After hitting $1.1575, the highest since late 2021, EUR/USD consolidated but held firm despite renewed US tariff threats. Markets largely dismissed the 50% EU tariff talk as strategic posturing. The euro forecast remains bullish, with potential to test $1.1650–$1.20, underpinned by reserve flows and relative macro stability. Even as the ECB begins a rate cut cycle, supportive fundamentals—lower energy prices, strong EUR effective exchange rate—suggest resilience. Overall, euro predictions point to continued strength against the dollar amid broader structural shifts.

The pound outlook improved sharply in May, with GBP ranking second among G10 currencies. Sterling hit post-Brexit highs on the BoE trade-weighted index, lifted by new trade deals and better-than-expected Q1 GDP growth (+0.70%). Solid retail and sentiment indicators, coupled with persistent core inflation, have pushed back expectations for Bank of England easing. Risks, however, remain—particularly around renewed US policy tensions. The pound forecast favors gradual GBP/USD gains toward $1.3650, while upside against the euro may be more limited. Pound predictions remain cautiously bullish if the UK continues to outperform and the BoE holds off on aggressive rate cuts.

Despite being the weakest G10 currency in May, the yen outlook remains modestly bullish. USD/JPY rose slightly, ending a four-month decline, spurred by improving risk appetite and rising US yields. However, Japan’s fundamentals—BoJ policy caution, global portfolio rebalancing, and potential QT moderation—support medium-term yen strength. Episodic flows like Nippon Steel’s US acquisition likely added temporary yen pressure. The yen forecast anticipates further USD/JPY downside as policy spreads compress and global demand for yen assets recovers. Yen predictions lean toward gradual appreciation, barring unexpected JGB or Fed-driven volatility.

The yuan outlook remains fragile amid persistent domestic headwinds. April data showed weak consumption, sluggish housing, and subdued credit. Recent CNY resilience reflects global USD trends more than Chinese fundamentals. Export data surprised (+8.1% YoY), but US shipments fell 21%, and rerouting via third countries may soon be curtailed by tighter US enforcement. With US-China negotiations stalling and tensions rising over tech and education, export growth could reverse in H2. The CNY forecast sees USD/CNY rising to 7.30 by year-end. CNY predictions suggest continued depreciation, offset only partially by external dollar softness and Fed easing.

The USD/INR forecast holds at 85.000 by Q2 2025 and 83.500 by Q1 2026, reflecting broad USD weakness. INR risks include tensions with Pakistan, uncertainty around a US-India trade deal, and potential US policy changes on remittances. However, lower inflation and improving flows—especially equity inflows and subdued oil prices—support INR stability. The RBI is expected to cut rates by 75 bps this year, with the repo rate reaching 5.25%. The rupee outlook remains moderately constructive, assuming a trade deal materializes and inflation stays in check. Overall, INR predictions lean stable to mildly bullish over the medium term.

The AUD outlook is cautiously constructive after modest May gains, supported by weaker USD and better risk sentiment. Strong domestic jobs and inflation data were offset by the RBA’s dovish 25bp cut, which pulled AU-US yield spreads lower. Despite optimism on China, RBA officials flagged downside risks from trade tensions. The Australian dollar forecast expects AUD/USD to trend higher, though short-term pullbacks are likely amid policy uncertainty. AUD predictions remain positive but highlight sensitivity to global sentiment shifts and further US-China escalations.

The New Zealand dollar outlook brightened in May as global sentiment improved and the USD softened. The RBNZ cut rates by 25bps but adopted a flexible tone, noting policy is nearing neutral. While GDP remains weak, inflation control and cautious easing support NZD stability. The NZD forecast suggests moderate gains in NZD/USD, though performance may lag other G10 peers. Overall, NZD predictions point to a slow upward path, contingent on external demand and domestic resilience.

The Mexican peso outlook remained strong, outperforming all LatAm peers in May. MXN hit its highest level since October, supported by easing US-China trade fears and strong carry appeal. However, growth remains fragile (+0.2% Q1), and Banxico’s ongoing rate cuts may undercut support. Remittance-related policy threats in the US also pose risk, with transfers totaling nearly $65B in 2024. The MXN forecast sees limited upside from current levels as optimism is likely priced in. MXN predictions favor some depreciation in H2 2025 if US policy pressures and domestic rate cuts continue.