Monthly Currency Outlook

June 2025 Currency outlook

What Happened

 U.S. Dollar weakness continued throughout May, reaching its lowest point in three years with the Bloomberg Dollar Spot Index dropping by 1.1% in value
Resilience in the Mexican economy kept MXN on the rise, hitting its strongest value over the Buck in nine months as last month came to a close
Euro fortunes continued as the shared currency climbed to its highest point since beginning of 2023
Despite “dovish” policy from the Bank of England, GBP surged to its best value in about three years
Japanese Yen is establishing itself as the Go-to safe haven rising by 1.0% in May; up 9.5% thus far in 2025

Monex USA’s View

USD prospects for advancement do not look good after a credit downgrade threw havoc at the perception of the American economy
Lack of interest in purchasing U.S.-treasury bonds signaling that the “Sell America” trade remains in play, thus keeping downward pressure on the Buck
Mexican Peso could remain at elevated levels with return of carry-trade popularity as it remains a source of yield for investors and FX traders
June will see plenty of central bank meetings that will attempt to provide guidance in midst of uncertainty
Potential for ceasefires and peace, along with any tariff delays will keep markets and Dollar on edge

IN FOCUS

JPY: May witnessed another round of gains for Japanese Yen, now almost up 10.0% for the year

(Bloomberg chart shows JPY appreciation over USD throughout 2025, reaching its strongest level in 2 years)

As U.S. markets struggle, the Yen is considered the safest among safe-haven assets

The Japanese Yen has improved as a result of the negative trend for the Buck exacerbated by doubts over the U.S.’s spending plans and slowdown
Both America and Japan are experiencing trouble in finding growth with Q1 contracting Gross Domestic Product figures in negative territory, around (-0.2%)
Nevertheless, optimism for Japan’s markets are having a moment with NIKKEI stocks up by 3.8%, their best monthly advance in 14 years
JPY has momentum as Bank of Japan Governor Kazuo Ueda suggested quantitative tightening will continue and rate hikes may arrive if wages stay up

THE VIEW — Buck appeal keeps fading in 2025

“Stagflation” and recession concerns are keeping the outlook for the Dollar humble

And the can keeps getting kicked down the road. Markets are becoming accustomed to the mention of the potential for higher tariffs to be applied idiosyncratically as well as a blanket policy. More importantly, business leaders as well as policymakers are starting to form strategies around the delays and inconsistencies when it comes to the likelihood of complex costs of doing business.

The White House continues to defend this strategy even after facing a court ruling declaring tariffs cannot be levied using the emergency powers claimed. An appeal decision quickly after has allowed the President to take charge in proposing and declaring tariffs, but in general, economists see trouble ahead without a consistent application or repeal.

(Bloomberg Dollar Spot Index has gone down by 7.7% thus far in 2025, the weakest streak since April 2022)

As cool and collected as Fed members may seem about a “balanced” economy, the Buck’s awful collapse this year is reflecting that not everyone is convinced things will be just fine. While Federal Reserve Chairman Jerome Powell has sounded mostly neutral about what the effects of tariffs can have on the financial system, some are already making predictions on what may come to fruition.

Fed Board of Governors member since 2020, Christopher Waller is the only one willing to predict that tariffs will indeed increase inflation, but he feels this will be temporary. He feels that no matter what the size of the tariffs, the effects on prices will be muted, especially during the second half of the year. Additionally, he believes the lack of upward inflationary pressure will aid in allowing Fed voting officials to find interest-rate cuts appropriate in order to stimulate the economy. Naturally, this bodes poorly for the U.S. Dollar as central bank policy becomes looser.

Establishing consistent growth is certainly becoming a worry in the minds of investors and traders, with analysts explaining that there could be a strange case of “Stagflation” on the horizon. This phenomenon is defined as low or deteriorating growth accompanied by stubborn inflation. What some economists are suggesting, though, is that prices may not be as capable of resurging if the threat to Gross Domestic Product growth is such that inflation stays tamed, meaning no producers will want to keep denting demand by adjusting prices higher.

Companies are now refusing to produce long-term projections, with confidence dwindling and the possibility that employment opportunities start becoming scarcer, as free trade is compromised. We are seeing signs of a softening Labor sector, with layoffs rising after the latest JOLTS (Job Openings and Labor Turnover Survey) in April revealed 196,000 dismissals, the largest rise for sackings in nine months.

Meanwhile, workers are sticking to what they have at the moment, as the number of people quitting their positions has fallen dramatically from the frenzy experienced throughout the post-pandemic recovery. Laborers voluntarily leaving their posts dropped by the most since November 2024, indicating a lack of confidence in finding worthy opportunities.

Unfortunately, those who are looking for employment are running into obstacles in their job search, with postings across industries becoming more limited while also offering less flexibility when it comes to working from home. Long-term Unemployment is undoubtedly climbing, with the number of people unemployed for 27 weeks or longer up by 179,000, up to 1.7 million in April. This cohort now represents 23.5% of all unemployed persons.

More importantly, job openings are uneven, with only healthcare and business services advertising positions, while finance, manufacturing, and technology had declines in their offers. Equity gains have also been supported by growth in only a few firms, leading to market concentration as investors cope with jitters surrounding tariffs and geopolitical headaches, as armed conflicts negate any progress or optimism.

Even the Paris-based OECD (Organization for Economic Cooperation and Development) slashed its growth outlook for the U.S., the second time it has done so in 2025. The first went from 2.8% to 2.2%, and now they believe the economy can advance just 1.6% for what is left of the year and 1.5% in 2026.

Unless some major breakthroughs occur that hand the economy a sense of longer-term relief, we feel the Buck will roller-coaster through these levels. June will be marked by words from financial authorities, diplomatic meetings, and amendments to the budget bill in the U.S. Senate.

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