2025 delivered a broad-based setback for the USD, which declined against all major currencies. Year to date, the greenback is down 14.46% against the Swiss franc, 13.36% against the euro, 7.81% against the Australian dollar, 7.54% against the British pound, 4.81% against the Canadian dollar, 2.86% against the New Zealand dollar, and 0.30% against the Japanese yen. This decline reflects resilience in foreign economies, a recalibration of safe-haven demand, and a shift in global interest rate expectations. Specifically, regarding interest rates, some countries have completed their easing cycles and there is an increasing probability of the beginning of a tightening cycle in Australia, New Zealand, and Canada in the second half of the year.
Below, we take a closer look at the USD and the other G10 currencies, providing a brief assessment of the economic backdrop and central bank outlook, followed by a technical view on where each currency might be headed in 2026.
Current Monetary Policy Stance
USA – USD
Economic & Policy Outlook:
The U.S. economy ended 2025 with solid growth and easing inflation, but the policy mix in 2026 shifts meaningfully. The “big beautiful bill” is set to deliver increased fiscal spending and significant tax cuts, providing near-term support to activity while raising longer-term inflation risks.
Monetary policy divergence remains a key theme. The easing cycle across most other G10 central banks appears largely complete, while the Fed’s latest Summary of Economic Projections still signals just one rate cut in 2026. Markets, however—possibly factoring in potential personnel changes—are pricing at least two cuts. We anticipated this divergence, which has driven our bearish USD view. That said, the market has largely absorbed this narrative, and momentum indicators suggest the dollar’s decline is over-extended in the near term. A period of consolidation now looks likely.
Political risk will also return to the foreground ahead of November’s U.S. midterm elections. With Congress narrowly divided, even modest seat changes could influence fiscal policy, central bank oversight, and defense spending. As a result, asset managers and corporate treasurers are likely to maintain contingency plans around debt-ceiling risks and the future path of industrial policy spending.
Technical View:
The U.S. Dollar Index (DXY), which tracks the USD against a basket of six major currencies, has declined nearly 11% in 2025, falling from above 110 in January to just below 98 at the end of December. On the monthly chart, the index is testing a major trendline that stretches back to 2011. Technically, the DXY has broken below its 200-day moving average and breached support at 98.00, suggesting further downside risk unless U.S. data surprises to the upside. The next significant support level lies near 92.50, while resistance stands at 100.
CHF – Swiss Franc
Economic & Policy Outlook:
Switzerland’s low-inflation economy continued to defy global trends throughout 2025. The Swiss National Bank (SNB) surprised markets with an early rate cut in March but adopted a wait-and-see posture for the remainder of the year. Despite lower policy rates, the CHF remained remarkably strong, aided by persistent current account surpluses and safe-haven inflows amid geopolitical uncertainty. The SNB did not intervene aggressively in FX markets, reinforcing the currency’s upward bias. Looking to 2026, if global risks persist, the CHF could see further strength, though the SNB may step in if appreciation becomes excessive.
Technical View:
USD/CHF broke below key support at 0.8800 in April and extended lower toward the 0.80 handle by year-end. Momentum indicators remain oversold on the weekly chart, but trendlines suggest potential downside toward the 2011 low near 0.71 if U.S. yields continue to slip. Resistance comes in at 0.8200 and then 0.8400. A sustained recovery will require a clear shift in Fed rhetoric or a rise in global risk appetite.
EUR – Euro
Economic & Policy Outlook:
The eurozone economy staged a gradual rebound in 2025, led by stronger-than-expected German industrial data and improving services PMI figures across the bloc. The ECB delivered its first rate cut in June but emphasized a cautious, data-dependent approach, with additional cuts in the second half as inflation moderated. Sticky wage growth and firm core inflation earlier in the year lent support to the EUR, though a softening in the latter months tempered gains. For 2026, the ECB is likely to continue easing gradually if growth remains stable, potentially capping EUR upside.
Technical View:
EUR/USD carved out a steady uptrend since bottoming near 1.02 in January, breaking through 1.09 in May and capturing and staying above 1.15 the back half of the year. The pair now faces resistance at 1.18, followed by 1.2275 A break of the latter would open the door to 1.25. RSI is elevated but not extreme, and moving averages remain in bullish alignment. Support is seen at 1.15.
GBP – British Pound
Economic & Policy Outlook:
The UK economy avoided recession in 2025, with a resilient labor market and stubborn inflation keeping the Bank of England on edge. The BoE initiated its first rate cut in Q3 as anticipated, but policymakers remained noncommittal amid political stability post-July elections. Weak productivity and Brexit-related trade frictions persisted as long-term drags, but sentiment improved in the latter half. Heading into 2026, further cuts may occur if inflation eases, supporting modest GBP gains if risk appetite holds.
Technical View:
GBP/USD started the year near 1.22 and managed to break above 1.265 in March, paused at 1.30 for a month, and proceeded to rally near 1.38 by July. It then moved back to test the 1.30 and ralled off of that to finish the year near 1.3450. A weekly close above 1.3650 would be technically significant, potentially opening the path back to 1.38 followed by 1.4250. Initial support lies at 1.3150 and at 1.30.
JPY – Japanese Yen
Economic & Policy Outlook:
The Bank of Japan remained a global outlier in 2025, slowly transitioning away from ultra-accommodative policy after ending negative rates earlier in the year. Rising wage growth and signs of inflation persistence prompted a more hawkish stance in the second half, contributing to a rebound in USD/JPY. Still, the yen continues to struggle despite the fact that the BOJ is the only central bank hiking rates. For 2026, additional hikes could occur if inflation holds, particularly if USD/JPY pressures ease.
Technical View:
USD/JPY staged a sharp reversal from its January highs near 158, falling to 140 by April amid intervention fears and softer U.S. yields, but rebounded strongly in the second half to close near 157. The pair now finds support at 155 and 150. Resistance sits near 162. The BOJ’s verbal jawboning and actual intervention remain key risk factors, and implied vol remains elevated.
NZD – New Zealand Dollar
Economic & Policy Outlook:
New Zealand’s economy showed signs of stabilization in 2025 after a technical recession, helped by strong migration and resilient commodity exports. The RBNZ remained one of the more hawkish central banks early on but eased policy in the second half as inflation cooled faster than expected, leading to tempered NZD gains. This divergence supported initial outperformance but faded later. In 2026, the RBNZ may pause cuts if commodity prices rebound, offering NZD some support.
Technical View:
NZD/USD broke above key resistance at 0.6100 in mid-year but retraced the whole move back to 0.5600 by November, closing near 0.6050. Momentum has weakened, with MACD signaling potential consolidation and next resistance at 0.5900 followed by 0.6000. Support lies at 0.5600 followed by 0.5450. The pair continues to track broader risk-on flows and commodity trends.
CAD – Canadian Dollar
Economic & Policy Outlook:
The Canadian economy slowed in 2025, with tepid GDP growth and rising unemployment, prompting the Bank of Canada to cut rates in June and follow up with additional easing later in the year. The BoC emphasized a gradual path and kept the door open to pausing if inflation flared. Oil prices were supportive but not dominant in the CAD narrative, with second-half softening contributing to modest gains overall. For 2026, tariff risks appear overblown, with an anticipated Supreme Court ruling likely to limit U.S. tariff impacts on Canada, bolstering commodities and global growth. Strong commodity momentum, resilient consumer spending driven by demographics, and positive USMCA developments, where the U.S. is expected to remain engaged, support further CAD strength. Political stability under the Carney government favors natural resources, enhancing investment appeal. However, ongoing housing challenges persist, though consumer response has been limited.
Technical View:
USD/CAD started the year around 1.44 and surged close to 1.48 in Feburary. It then turned on a dime and moved to 1.36 by June. A retrace to near 1.4150 ensued until the Fed cut rates in November which caused the USD/CAD pair to close near 1.3650 at year-end. Support comes in at 1.36 followed by 1.3450, and 1.32. Resistance sits near 1.3825 and 1.40. The pair is tracking U.S. yields closely, and a dovish Fed combined with resolved tariff uncertainties could push USD/CAD toward 1.30 by year-end, implying another 5% rally in the loonie.
AUD – Australian Dollar
Economic & Policy Outlook:
Australia’s economy held up better than expected in 2025, and the RBA maintained a hawkish bias, warning of upside inflation risks. Housing prices remained firm, and the labor market showed few signs of weakness. With China’s stimulus showing traction in the second half, the AUD received an additional tailwind. Heading into 2026, continued commodity strength could bolster the AUD if global demand holds.
Technical View:
AUD/USD broke down to around 0.60 level after starting the year at 0.62, it then ralled to near 0.67 by year-end. A decisive move above 0.68 opens the path to 0.6940, followed by 0.72. Key support remains at 0.66 and 0.6425. The pair is increasingly tracking equity market risk sentiment and commodity flows, particularly iron ore.
Emerging Market Currencies
A likely secular decline in the USD can be spotted when emerging market currencies break through major resistance levels. USD downturns tend to be prolonged and broad, often fueling rallies in metals, commodities, and foreign currencies, as seen in the 1970s and early 2000s.
Does this signal the USD losing its reserve currency status? Unlikely, given the unmatched depth of the U.S. bond market. However, it may further erode the USD’s dominance, paving the way for a more multipolar currency system, with the euro and Chinese yuan gaining prominence.
Final Takeaway
The broad selloff in the USD during 2025 underscores the power of monetary policy divergence and global macro resilience. While much will hinge on the Fed’s path forward and the impact of new fiscal measures, near-term momentum favors consolidation following an over-extended decline. Longer-term, renewed USD weakness remains our base case unless growth or inflation surprises bring the Fed back into play. As always, volatility and headline risk will remain elevated, and positioning into 2026 requires both discipline and flexibility.