iBanFirst, a provider of foreign exchange and international payment services for businesses, authorized to operate throughout the European Union, has released the FX Market Outlook 2025 report with the aim to help companies better understand and manage currency risks in the coming year.
Get all the insights below!
Market volatility will remain high
Central banks are adjusting their monetary policies based on economic indicators such as inflation, economic growth, and employment, rather than on a fixed schedule. While this approach appears positive, it also brings high volatility to the currency market, which can lead to sharp exchange rate fluctuations, complicating companies’ financial planning and forecasting. Analysts also predict that interest rate cuts in 2025 will be more moderate than in previous easing cycles, as the absence of a recession does not require drastic measures.
Attacks on international trade are on the rise
Free trade is increasingly impacted by protectionist policies, economic boycotts, and obstacles in securing essential trade routes. Approximately one-third of the world’s countries, including 60% of developing nations, are under economic sanctions imposed by the United States. Blockages in key trade points, such as the Formosa Strait, where China and Taiwan are in conflict, or the Bab El Mandeb Strait in the Red Sea, affected by regional conflicts, pose major risks to global economic growth. To mitigate these challenges, companies can diversify their trading partners and enhance their internal expertise in managing geopolitical risks.
Euro area grows slowly but developed economies not at risk of recession
The Eurozone is experiencing modest growth, around 1%, due to limited flexibility in monetary policy and stagnation in Germany, a pillar of the European economy. This situation could negatively impact exports of CEE-based companies in European markets. However, analysts consider a recession in developed economies unlikely, as real wage growth, the gradual easing of restrictive monetary policies, and expansionary fiscal policies, particularly in the U.S., support global economic activity. The U.S. is expected to outpace global growth rates in the coming years.
“In 2025, as volatility persists and global protectionism and economic boycotts reshape international trade, CEE companies engaged in import-export should prioritize robust currency risk management and market diversification. A strategic approach to hedging, combined with close monitoring of macroeconomic trends, will be essential for shielding businesses from currency fluctuations and fostering stability in their global partnerships”, Johan Gabriels, Regional Manager for Central and Eastern Europe at iBanFirst.
Currency Projections for 2025
Slight increase for EUR/USD pair
In 2025, the EUR/USD exchange rate could reach a peak of 1.05. As inflation decreases in the U.S. and the Federal Reserve eases monetary policies, U.S. bond yields are expected to fall, prompting speculative funds to shift investments from dollars to euros. However, this increase may not be fully sustainable. The dollar is expected to remain strong in 2025 and beyond, bolstered by robust U.S. economic performance and the continued appeal of the U.S. stock market. While Donald Trump favors a weaker dollar, his tariffs could unintentionally drive up its value by reducing import volumes, which in turn lowers demand for foreign currency.
CEE currencies
Trump’s election, the rise of protectionism and the increasingly uncertain global economic environment could favor safe-haven currencies – the dollar and euro – against emerging currencies in 2025 including those in the CEE region. The good news, despite all this, is that there are few major elections scheduled in emerging countries next year. This is usually a significant factor behind exchange rate instability.
The EUR/RON exchange rate is projected to remain stable, supported by the National Bank of Romania, which is expected to continue supplying market liquidity.
The EUR/HUF pair is expected to continue its upward trend long-term with limited influence from Hungary’s monetary policy, as most rate adjustments have already been implemented. The pair has recently exceeded the 400 threshold.
The EUR/PLN and EUR/CZK pairs are expected to outperform the EUR. Both Polish Zloty and Czech Koruna are expected to be among the best-performing currencies in Central and Eastern Europe in 2025. iBanFirst anticipates that both currencies will benefit from economic recovery and improving investor sentiment towards the region.
