The U.S. dollar could continue to fall this summer, warns Bank of America. #BankOfAmerica
Bank of America has warned that the U.S. dollar could experience new declines this summer, following a 9% drop this year. This weakness of the dollar is generally seen as positive for dollar-denominated assets, such as bitcoin and gold.
The dollar index, which measures the value of the dollar against major currencies, has fallen nearly 9% to 99.74 this year, partly due to the tariff war initiated by President Donald Trump, which has led to an outflow of U.S. assets.
The global foreign exchange research team at Bank of America, led by Athanasios Vamvakidis, notes that tariffs are more detrimental to the U.S. economy as the country trades more with the rest of the world than other nations. Despite the recent resilience of the U.S. economy and growth-supporting factors such as tax cuts, the report emphasizes that "negatives dominate."
Political uncertainty on several fronts persists, which could lead companies to pause hiring and investment plans. The report also indicates that tariffs, in most scenarios, will be significantly higher than current levels.
Additionally, the market is reacting negatively to the loosening of fiscal policy at a time of record debt levels, leading to higher borrowing costs. The Federal Reserve, for its part, has its capacity for action limited due to rising inflation expectations.
Bank of America strategists also point to the collapse of migratory flows and a possible drop in demand after an increase in the first quarter. High-frequency indicators, such as ISM data and the Dallas Fed's weekly economic index, suggest a possible slowdown in the economy in the coming months, with the latter reaching its lowest level since December.
