After a dramatic April in currency markets, businesses with global currency exposures enter May facing uncharted territory. The first 100 days of President Trump’s second term have brought renewed focus to tariffs and trade, raising important questions for businesses managing cross border payments and foreign exchange risk.
The worst-case scenario seems to have been avoided, however a 10% universal tariff and sectoral charges will take their toll on the global economy. Even with the 90-day pause, the current escalation would bring global tariffs back to levels last seen in the early 1930s.
With a potential reordering of the global economic system placing currency risk front and centre, download this month’s Global FX Outlook for key insights to help inform your FX hedging strategy and keep your business steady.
Dollar weakness signals a paradigm shift
April marked a turning point for the greenback, with the US Dollar Index down 5%, dropping below 100 for the first time since 2022. Once a safe haven, the dollar has become more risk sensitive as inconsistent policy from the Trump administration undermines global investor confidence.
This may not be a temporary wobble. With the dollar down more than 8% year-to-date, analysts are comparing this moment to structural downturns seen in 1986 and 1973, years tied to major shifts in the global monetary system. Talk of de-dollarization is increasing, with foreign reserves shifting and investors reducing exposure to US assets. Skepticism about the dollar’s dominance will likely remain a key theme throughout the year.
Major currencies strengthen
As the dollar has weakened, other major currencies have rallied:
- EUR/USD has risen over 14% from recent lows, with some analysts eyeing a return to $1.20 by year-end.
- GBP/USD climbed around 4%, trading at levels not seen in three years as dollar softness persists.
- AUD/USD rebounded 9% following earlier declines, benefiting from improved risk sentiment and a weaker greenback.
These moves highlight how global markets are repositioning, with many investors reassessing the relative strength of economies and the stability of their policy environments.
US exceptionalism is fading
Expectations for US rate cuts are rising as markets price in a weakening economic outlook. A deteriorating growth picture, combined with trade-induced shocks and political uncertainty, has shaken faith in the US as the engine of global stability. Recent moves in bond markets, especially the sharp sell-off in Treasuries, long considered one of the world’s safest assets, suggest waning confidence in US fiscal and monetary stability.
Risk sentiment rocked
Heightened volatility, and risks tied to geopolitical uncertainties and tighter financial conditions remain significant challenges, which sent our global risk sentiment index to multi-year lows. Investors are on edge as inconsistent messaging from the White house erodes trust in US policy, and escalating trade war tensions and even fears about the US central bank’s independence, also undermine confidence in US assets.
Watch a recap of the Global FX Outlook for May
Watch our market analyst team present a short overview of this month’s outlook to help your business stay ahead of the game.
The dollar’s decline suggests that beyond market jitters, the global system is under strain. Businesses managing exposure to foreign currencies must stay agile, rethink their hedging strategies, and monitor evolving risks as this new FX landscape takes shape.
Want more insights on the topics shaping the future of cross-border payments? Tune in to Converge, with new episodes every Wednesday.
Plus, register for the Daily Market Update to get the latest currency news and FX analysis from our experts directly to your inbox.
