Market bets on dollar decline as central banks cut rates in 2025
- In 2025, central banks have implemented 88 rate cuts, the fastest since the 2020 Covid crash.
- There is a prevailing market sentiment to sell the US dollar, noted as a crowded trade.
- Michael Hartnett suggests increasing allocations to gold and cryptocurrencies in light of these economic changes.
In 2025, a significant shift in monetary policy precipitated a remarkable series of central bank rate cuts, totaling 88 thus far, marking the fastest cycle of reductions since the Covid-19 crash in 2020. This trend has notably changed the investment landscape, prompting many investors to reconsider their positions, particularly regarding the US dollar. The increasing sentiment is strongly moving toward selling the dollar, which has been identified as one of the most overcrowded trades in the market according to the latest Fund Manager Survey. Michael Hartnett, the Chief Investment Officer at Bank of America, highlighted these developments in his weekly analysis, often referred to as the Flow Show. His observations framed the looming Jackson Hole Fed symposium as a pivotal moment for the market, suggesting that the symposium would signal the next steps in fiscal policies after the tremendous number of rate cuts experienced this year. Hartnett also drew attention to the implications these policies may have on the markets, particularly in relation to safe-haven assets like gold and cryptocurrencies, indicating that allocations to these investments may need to increase as uncertainty grows.