Global growth to continue but policy risks dominate 2025 forecast from TD Economics

TD Economics sees a chaotic but growing 2025 economy ahead, with Trump policies potentially shaking up markets. The bank expects both the US and Canadian economies will navigate through policy uncertainties, but warns of significant risks from potential tariffs and immigration changes.

Key points:

US economy forecast to grow 2.0% in 2025, down from 2.7% in 2024
• Fed expected to cut rates by 125bps total through 2025 (including 25 bps next week)
• Canada seen growing 1.7% in 2025, improving from 1.3% in 2024
• Even a 10% blanket tariff on Canada would likely cause extended economic stagnation over 2 years
• Bank of Canada forecast to cut another 100bps to reach 2.25% “neutral” rate
• Europe facing headwinds from US tariffs and fiscal challenges
• For the US, tariffs risk creating a stagflationary impulse

Some FX forecasts for year-end 2025:

• EUR/USD: 1.0600
• USD/GBP: 1.2700
• USD/JPY: 146.50
• USD/CNY: 7.30
• USD/CADL 1.4080

For 2026, they see the US dollar broadly weakening.

Find the full report here.

This article was written by Adam Button at www.forexlive.com.