Solid growth despite political uncertainty

Danske Research Team Danske Bank A/S

Fiscal and trade policy uncertainty overshadows US economic outlook, but we maintain our forecast for steady yet gradually cooling growth in 2025. We revise up our 2025 GDP forecast to 1.9% (from 1.5%) partly due to more positive overhang, and see 2026 growth at 2.1%

We expect easier tax policies to lead to a net increase in fiscal deficits especially in 2026 when compared to CBO’s baseline. Weaker immigration outlook poses a downside risk to structural growth.

We assume 10% universal tariffs on all imports and 40% on imports from China, likely implemented towards the end of 2025. Trump’s announcements suggest some increases could be announced already at the beginning of the new presidential term in January.

Inflation forecasts have been adjusted modestly higher for 2025, with roughly half of the increase reflecting impact from tariffs. We see headline inflation averaging 2.7% in 2025 (from 2.2%) and 2.4% in 2026. Core inflation is set to average 2.9% in 2025 (from 2.4%) and 2.5% in 2026. We keep our Fed call unchanged and expect the Fed to reach a terminal rate of 3.00-3.25% by September 2025, which will be maintained through 2026.

Download The Full Research US

Author

Danske Research Team

Danske Bank A/S

Research is part of Danske Bank Markets and operate as Danske Bank's research department. The department monitors financial markets and economic trends of relevance to Danske Bank Markets and its clients.

EUR/USD hits two-day highs near 1.1820

EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.

GBP/USD reclaims 1.3600 and above

GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.

Gold climbs further, focus is back to 45,000

Gold regains upside traction and surpasses the $4,900 mark per troy ounce at the end of the week, shifting its attention to the critical $5,000 region. The move reflects a shift in risk sentiment, driving flows back towards traditional safe haven assets and supporting the yellow metal.

Crypto Today: Bitcoin, Ethereum, XRP rebound amid risk-off, $2.6 billion liquidation wave

Bitcoin edges up above $65,000 at the time of writing on Friday, as dust from the recent macro-triggered sell-off settles. The leading altcoin, Ethereum, hovers above $1,900, but resistance at $2,000 caps the upside. Meanwhile, Ripple has recorded the largest intraday jump among the three assets, up over 10% to $1.35.

Three scenarios for Japanese Yen ahead of snap election

The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.

XRP rally extends as modest ETF inflows support recovery

Ripple is accelerating its recovery, trading above $1.36 at the time of writing on Friday, as investors adjust their positions following a turbulent week in the broader crypto market. The remittance token is up over 21% from its intraday low of $1.12.