The dollar has depreciated more in the first half of 2025 than yield differentials would have predicted, see charts below and the chart book available here.
Regression models indicate that this was due to the trade war and economic policy uncertainty, including concerns among foreign investors about Section 899 and the Mar-a-Lago Accord.
Looking ahead, with Section 899 behind us and the trade war likely to be resolved within the next couple of weeks, the US dollar is expected to appreciate again.
Renewed strong appetite for US assets after Liberation Day is also visible in the Treasury International Capital data for May.
Note: 1-year yield differential = 1-year German government bill minus 1-year T-bill. pp = percentage points. Sources: Bloomberg, Macrobond, Apollo Chief EconomistSources: Bloomberg, Apollo Chief EconomistSources: US Department of Treasury, Macrobond, Apollo Chief Economist
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