On Thursday, BCA Research, a leading financial research firm, shared its outlook on the future of the US dollar, forecasting a potential decline by mid-2025.
Marko Papic, chief strategist and senior vice president at BCA Research, expressed a positive outlook for the dollar in the near term, particularly as President Trump continues to promote tariffs and tax cuts. However, Papic predicts that the combination of high U.S. Treasury yields and a growing budget deficit will force the president to moderate his aggressive fiscal policies, which could ultimately weaken the dollar.
The strategist stressed that the U.S. government’s reliance on stimulative fiscal policies to support U.S. assets is unsustainable, and he expects the dollar to begin to fall once the reality of government spending will become apparent. Despite a strong jobs report that has recently fueled the dollar’s performance, Papic cautions that this upward trend may not be sustainable in the face of fiscal policy challenges.
Papic believes that although the dollar could potentially revisit its 2022 highs of 113 on the dollar index in the near term, Trump’s fiscal approach will face significant obstacles in the next six months. The president’s ambitious spending plans are at odds with a budget deficit that has already reached alarming levels.
-The need to balance these expansive fiscal ambitions with the demands of a bond market that is losing patience will likely force Trump to scale back his promises of tax cuts and tariffs. These policy changes, which markets were counting on to maintain dollar strength, could lead to disappointment and contribute to the currency’s eventual decline.
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