As 2024 ends, political and economic uncertainties will continue into 2025. We are unsure about Donald Trump’s economic agenda and financial impact, which will hinder growth next year.
We expect the growth rates of the US and the Eurozone to become more similar in 2025. This will happen because US growth will slow down due to inflation caused by Trumponomics and the Federal Reserve keeping interest rates stable. Eurozone growth may strengthen but will stay limited. Inflation is expected to return to the 2% target, allowing the European Central Bank to cut rates.
In summary, 2025 may show similar growth rates but different inflation trends and monetary policies. We also expect unemployment rates to rise, but there are some positive signs, such as a possible revival in Europe and stronger measures to tackle its challenges.
The weight of uncertainty
Uncertainty will significantly affect the economy in 2024 and 2025, and it has been a growing issue for years.
The United States election results have many possibilities and potential changes, especially considering President-elect Donald Trump’s economic plan. There are many questions about his possible actions and their potential impact on the global economies. Furthermore, new uncertainties in France, Germany, and Japan complicate economic growth.
We anticipate ongoing fiscal constraints and a rise in unemployment in 2025. Despite improved purchasing power in 2024, a rebound in consumer spending seems unlikely.
Corporate investment faces challenges due to weak finances and uncertain demand, although residential investment may benefit from better credit conditions. The automotive industry is recovering, while the industrial sector struggles, though the aeronautics sector shows promise. These trends are expected to continue into 2025.
Inflation trends are shifting between the US and the euro area, likely resulting in different monetary policies. We expect US inflation to rise again by Q2 2025 due to Trumponomics 2.0. This increase will probably prevent further rate cuts, keeping the target range at 4.25% to 4.50% until mid-2026, with reductions only after inflation peaks.
In the euro area, disinflationary pressures should ensure a return to the 2% inflation target by 2025, allowing the European Central Bank to continue its gradual easing of monetary policy. After four rate cuts in 2024, four more cuts are expected in 2025, lowering the deposit rate to 2% by June. If economic conditions weaken more than expected, further rate reductions may follow.
Overall, this economic scenario has more downside risks than upside. However, Europe could recover through bold measures to tackle structural challenges.
Gold recap 2024
It’s usually a good practice to review the yellow metal’s behavior around events and news catalysts and analyze patterns and correlations to gain insights and understanding.
Today, we’ll recap the start of the year to June, which saw a broad rally higher after a slow start.
Gold traded between $2,000 and $2,070 between January 1 and February 29, affected by shifting expectations around Federal Reserve interest rate cuts and geopolitical events.
January’s data often exceeded forecasts, with the Consumer Price Index (CPI) at 3.4%, with the 3.2% prediction and strong employment reports indicating job growth and wage increases. These developments strengthened the US dollar and pushed bond yields above 4.00% in January.
February 29 to April 19: Gold Rallied Approximately 17% to $2,400
Gold saw an impressive rally from February to April 2024, driven by rising geopolitical tensions and indicators of a potential recession. Traders exhibited significant FOMO (Fear Of Missing Out) as gold prices continually broke records.
In early March, the US unemployment rate rose from 3.7% to 3.9%, and average hourly earnings growth fell from 0.5% to 0.1%. The European Central Bank (ECB) also downgraded its growth forecasts, while global PMI data showed declines. The rally accelerated in April as geopolitical tensions escalated, particularly with Israel bracing for possible missile attacks from Iran, pushing gold prices to new highs near $2,375.
Gold prices rose from $2,000 to $2,400 by mid-April due to safe-haven demand, remaining stable between $2,300 and $2,400 from April to June 2024. The Israel-Iran conflict briefly pushed prices to a peak of $2,430, but positive US economic data and a pause in Chinese gold purchases capped further gains.
Challenges ahead for the euro and pound in 2025
Since the November US election, the dollar has been strong. Experts believe it will do better than other currencies until 2025. This is mainly because of rising inflation expectations due to President-elect Trump’s proposed tariff increases. These changes might also make the Federal Reserve rethink its decision to lower interest rates.
Due to ongoing challenges, the euro and British pound are at risk of underperforming against the US dollar.
Economic data hasn’t been on their side.
The struggling Eurozone economy and potential U.S. tariffs may keep the euro subdued, possibly falling below parity in 2025.
Weak data pressures the pound, leading the Bank of England to consider deeper rate cuts. The OECD now forecasts UK GDP growth to be 0.9%, down from 1.1%.
The OECD predicts the UK economy will grow faster than its European G-7 peers (Germany, France, and Italy) in 2025 and 2026. UK GDP growth will firm to 1.7% next year, boosted by the significant increase in public expenditure set out by the Starmer government in the recent budget.
The prospect of a slower pace in British interest rate cuts than elsewhere is helping the Pound Sterling gain an edge over other major currencies against the US dollar. However, the UK private sector is still fragile, and some currency pundits see GBPUSD retreating below the US$1.20 mark.
Unexpected political upheavals add further pressure.
It should be the euro’s time to shine, considering that over the past seven years, it’s maintained its ground every December, capitalizing on the US dollar’s seasonal softness. However, political instability has impacted the euro this year.
A no-confidence motion in the National Assembly has led to the removal of France’s minority government. This is the first time a French government has been ousted in over 60 years. Prime Minister Michel Barnier’s budget plan 2025 was defeated by a coalition of hard-right parties that gained a majority vote.
This political crisis, ongoing labor strikes, and social unrest will further erode investor confidence in the Eurozone. Similarly, Germany faces political instability after the coalition government of SUSial Democrats, Greens, and Free Democrats collapsed in November, prompting a snap election in February 2025.
Concerns about competition for energy resources
As if these hindrances were insufficient for the euro, the Eurozone has been pitched back into a potential energy crisis. Colder weather forecasts, dwindling storage, and competitive market forces from Asia have begun to pressure gas prices. This is an unwelcome reprise of its 2022–2023 experience when a sharp rise in energy prices followed Russia’s invasion of Ukraine and disrupted Russian energy exports to Russia.
European gas prices have reached a 14-month high due to tightening supplies and heightened global competition for LNG. EU gas storage is 84.7% full, down from 94.2% last year.
The EU is increasing storage targets for February 2025 amid concerns over supply risks, especially with the expiration of the gas transit deal between Russia and Ukraine on December 31, which will likely not be extended. While wind power may provide some relief, energy concerns are still impacting the Eurozone economy.
France benefits from its stable nuclear power, and discussions are resurfacing about Germany potentially re-commissioning some of its decommissioned reactors, the last of which was shut down in April 2023.
What’s on the horizon for currencies
For all of the swirling influence in the currency markets, medium-term relative value comes down to what holders earn—which comes down to interest-rate differentials. That, and the fact that heightened geopolitical tensions and trade war concerns underpin demand for the US dollar as a safe-haven asset, explains much of the greenback’s strength.
In such an environment, the pound and the euro greenback, other currencies, find themselves on the wrong side of the cross while dealing with their significant issues.
Bitcoin Price Annual Forecast: 2025 outlook brightens on expectations of US pro-crypto policy
Bitcoin’s (BTC) price has soared over 140% in 2024, reaching $100,000 in December. This rally was driven by the Bitcoin Spot Exchange Traded Funds (ETFs) launch in January and the reduced supply after the fourth halving in April.
Momentum picked up with the US Federal Reserve’s interest rate cuts beginning in September and the election of crypto-friendly candidate Donald Trump in November. Experts predict a bullish outlook for BTC, with price targets exceeding $200,000 by 2025.
Bitcoin in 2024: The year of the landmark $100K
Bitcoin’s price grew over 140% in 2024, reaching a new all-time high (ATH) of $108,353 in mid-December. This remarkable increase above the $100K threshold and surpassing a $2 trillion market capitalization was significant for Bitcoin and the entire crypto market.
The Rise of ETFs and Corporations
In January 2024, Bitcoin became more popular after the launch of sUSt ETFs. By the end of the year, these ETFs held over 1 million Bitcoins. Institutional investors accumulated 16.4 million BTC, and Bitcoin surpassed $100,000 for the first time, marking a key milestone for the cryptocurrency industry.
The January 2024 launch of spot Bitcoin ETFs in the US made Bitcoin accessible to investors, boosting demand from companies like MicroStrategy and Tesla.
Bitcoin’s fourth halving cut supply inflation by 50%, enhancing scarcity and sparking a price rally. Political changes, including Donald Trump’s election and Gary Gensler’s resignation, raise hopes for better regulations, driving Bitcoin higher. Strong technical analysis forecasts BTC prices exceeding $200,000 by the end of next year.
As we look towards 2025, we expect to face challenges and see new opportunities. We will need to adapt to changes in the market and new policies.
We wish you a prosperous 2025 filled with growth and rewarding investment opportunities.
Happy New Year, and best of luck in the year ahead!