On Thursday, BCA Research, a leading financial research agency, shared insights into the future of the US dollar, in which a potential decrease by mid -2025 was predicted.
Marko Papic, Chief Strategist & Senior VP at BCA Research, expressed positive prospects for the dollar in the short term, especially now that President Trump continues to promote rates and tax cuts. Papic, however, expects that the combination of high interest rates on US government bonds and a growing budget deficit will force the president to moderate his aggressive budget policy, which could ultimately weaken the dollar.
The strategist pointed out that the dependence on the US government of stimulating budget policy to strengthen American assets is untenable, and he expects the dollar to fall as soon as the reality of government spending becomes clear. Despite a strong job report that recently fueled the performance of the dollar, Papic warns that this upward trend may not be sustainable in the light of the challenges in the field of budget policy.
Papic is of the opinion that, although the dollar could possibly reach the highest point of 113 in 2022 in the short term, Trump’s budget approach will be confronted with considerable obstacles within the next six months. The ambitious spending plans of the president are at odds with a budget deficit that has already reached alarming levels.
The need to balance these expansive budget ambitions with the requirements of a bond market that is losing his patience, will probably force Trump to reduce his promised tax reductions and trade rates. These policy changes, on which the markets have counted to maintain the power of the dollar, could lead to disappointment and contribute to the final fall in the currency.
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