Danske Research Team
Danske Bank A/S
Welcome to budget guide 2025
As we head into an autumn that looks set to be characterised by central bank rate cuts and continued macroeconomic and geopolitical uncertainty, we at Danske Bank Research present the Danske Bank Budget Guide 2025. The Budget Guide includes our outlook on the global economy, as well as fixed income and FX markets, for the year ahead.
We extend our forecasts until the end of 2025 and seek to answer a number of questions that companies will likely face in the coming months:
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What is the outlook for the global economy?
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How are key export markets doing?
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How should companies hedge their liabilities?
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How should companies hedge FX exposure?
Budget Guide 2025 is intended as a quick reference guide to help facilitate EUR-based companies' 2025 budget planning. With this in mind, we present three scenarios for the global economy in general and the USD in particular.
Baseline scenario – Normalising economies (50% probability)
Economic growth, inflation, unemployment rates and interest rates have, to varying degrees, moved towards normal levels in the US, the euro area, and the Nordic countries, following the extremes of COVID and high inflation. We expect this process to continue, which implies higher growth in Europe and most Nordic countries, and slightly lower growth in the US. Labour markets should become slightly less tight, and rising real incomes should support European consumer spending. Lower interest rates should be a modest support for construction and investment. • High interest rates have been instrumental in fighting inflation, but now the time has come to lower them. The US has a higher starting point than the euro area, and US inflation is more clearly under control, so we expect the Federal Reserve to move faster. All central banks are however expected to be cautious and respond to data.
The Chinese economy continues to struggle with a housing crisis and weak private consumption. Growth is held up by stimulus and a moderate improvement in exports. We look for more of the same in 2025 with growth just below 5%. This is a negative factor for many European businesses with large sales in China.
This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector.
This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange.
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Editors’ Picks
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
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