On Thursday, BCA Research, a prominent financial research company, shared views on the future of the US dollar, predicting a possible decline by mid-2025.
Marko Papic, Chief Strategist & CEO at BCA Research, expressed a positive outlook for the dollar in the near term, especially as President Trump continues to promote tariffs and tax cuts . However, Papic expects the combination of US Treasury bond yields and a growing budget deficit to force the President to reassess his aggressive fiscal policies, which could weaken the dollar at its end.
The strategist pointed out that the US government's reliance on stimulative fiscal policies to support American assets is unsustainable, and he expects the dollar to begin declining once government spending becomes apparent. Despite a strong jobs report that has boosted the dollar's recent performance, Papic warns that this upward trend may not be sustainable in the face of fiscal policy challenges.
Papic believes that although the dollar may revisit the 2022 highs of 113 in the short term, Trump's fiscal approach will face significant obstacles in the next six months. The President's ambitious spending plans are in the face of a budget deficit that has already reached alarming levels.
Balancing these broad fiscal ambitions with bond market demands that are losing patience is likely to force Trump to scale back his promised tax cuts and trade targets. These policy moves, which the markets have been counting on to maintain the strength of the dollar, could lead to disappointment and contribute to the currency's eventual decline.
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