Experts at BCA Research, a major financial firm, warn that the US dollar could lose ground by mid-2025. The cause of this unexpected shift may lie in the current policies of US President Donald Trump.
According to Marko Papic, Chief Strategist and Senior Vice President at BCA Research, the greenback is expected to rally in the short term, but its longer-term outlook is quite bleak. Papic believes that the combination of high US Treasury bond yields and a rising budget deficit will compel Donald Trump to temper his aggressive fiscal policies. In this scenario, the American currency could weaken, the expert argues.
BCA Research's currency strategist believes that the US government's reliance on stimulative fiscal policy to support American assets is not a winning strategy. Against this backdrop, the dollar could begin to decline once the reality of government spending becomes apparent. Despite recent strong US jobs data, which has bolstered demand for the greenback, Papic cautions that this uptrend may prove unsustainable given the fiscal policy challenges.
Papic also sees the possibility of the dollar returning to the 2022 highs. However, the biggest obstacle for the greenback remains Trump's fiscal policy. In this regard, the American currency could face significant challenges over the next six months. According to the expert, the president's ambitious spending plans run counter to the budget deficit, which has already reached alarming levels.
The need to balance these vast fiscal ambitions with the demands of the bond market will force Trump to cut promised tax breaks and trade tariffs. Such drastic changes could severely disappoint investors. In particular, many market participants were expecting continued fiscal policies aimed at maintaining the dollar's strength. Thus, a shift in this course could lead to a significant nosedive in the greenback.
