he year 2025 has emerged as one of the most turbulent periods for the global foreign exchange market. Shifts in global monetary policy, political and trade uncertainties as well as commodity price movements have created a rapidly changing market landscape.
Since the beginning of the year, the FX market has been shaped by the tug-of-war between expectations of interest rate cuts by the United States Federal Reserve and uncertainty surrounding the direction of US trade policy.
In the first quarter (Q1) of 2025, the US dollar weakened as markets priced in earlier Fed rate cuts, amid easing inflation and signs of slowing economic growth. European and Asian currencies gained momentum during this period, with the Swedish krona and Norwegian krone standing out as outperformers and serving as safe haven currencies.
However, this trend was short-lived. Entering the second quarter, US economic data proved resilient, particularly consumer spending and labor market conditions, dampening hopes of faster rate cuts. As a result, the dollar strengthened again, causing many other currencies to depreciate.
The trade policy under President Donald Trump’s administration has also become a key driver, albeit an unpredictable one.
Since early August, the White House has imposed a new wave of tariffs covering a broad range of products, from European automobiles to industrial metals, such as copper. These measures have fueled global market volatility as businesses and investors struggle to anticipate shifting US trade strategies.
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Consequently, safe haven assets were once again in high demand, with the US dollar, gold and US Treasuries strengthening during this period.
