2025 Results: the market made money on the dollar

In 2025, the U.S. dollar posted its weakest performance in the past eight years, losing around 9% against a basket of major currencies. The reasons were a systematic mispricing of future Fed policy, rising fiscal risks, and growing political uncertainty. The most profitable strategy of the year was trading G10 currencies against the dollar.

Even amid strong macro data, including U.S. GDP growth in Q3, the market toward year-end ignored the current state of the economy and focused on expectations of monetary easing in 2026. Trump’s tariff policy destroyed familiar fundamental reference points, forcing currencies to search for their own drivers.

EUR

The euro became the main beneficiary of a weak USD: EUR/USD gained around 13–14%. Despite the ECB pausing its rate-cut cycle, the single currency strengthened even during periods of policy easing. Key risks for the EU remain trade barriers and geopolitics, including the need for structural economic adjustment amid the conflict in Ukraine.

GBP

The pound performed better than expected but was limited to gains of roughly 8%. In December, the Bank of England cut the rate to 3.75%, while signaling that further easing is constrained by inflation risks.

JPY

Despite the Bank of Japan’s policy pivot, USD/JPY remained elevated due to the interest rate differential. For the market, the critical factor is not normalization itself, but its pace and the eventual neutral rate level. With slow BOJ action and persistently high U.S. yields, the pair may remain at elevated levels.

AUD

The Australian dollar leveraged USD weakness and the U.S.–China conflict as a supporting factor. AUD/USD rose by about 8.5% over the year. The RBA kept rates around 3.85%, while key drivers remained expectations for Chinese demand and overall risk appetite in commodities.

CAD

The Canadian dollar continued to lag: USDCAD fell by about 4.8%. Relatively calm oil dynamics in 2025 weakened CAD’s traditional “oil support.” The main risk is uncertainty around USMCA trade conditions in 2026.

Throughout the year, the market reacted excessively to tariff debates and trade agreement revisions, worsening long-term expectations for the U.S. Most conflicts stabilized, except for the U.S.–China confrontation.

Geopolitical risks persist: tensions in the Persian Gulf and Ukraine remain far from resolution. China is increasing military activity around Taiwan. A potential escalation involving the U.S. would be strongly negative for the dollar and could trigger renewed capital flight into commodities and derivatives.

At least through Q1, the base tactic remains unchanged: trade not strong currencies, but a weak dollar.

If the Fed shows hesitation and the market continues to price in U.S. rate cuts, USD will remain under strong pressure. New trade or military conflicts will cause sharp but unsustainable moves. The medium-term direction of the dollar will be determined exclusively by U.S. macro statistics — now returning to a normal publication schedule.

So we act wisely and avoid unnecessary risks.

Profits to y’all!