Investing.com – The US dollar has weakened against most major currencies in the wake of the Federal Reserve’s dovish shift, and according to Capital Economics, further declines are in store, with a Trump victory the potential wildcard.
With the dollar near the bottom of its range beyond 2022, “our sense is that a period of consolidation is more likely than further sharp declines in the near term,” Capital Economics analysts said in a Sept. 26 note.
That said, “we still expect the dollar to weaken some more over the course of 2025 as short-term rates continue to decline and risk sentiment remains strong amid a global recovery and an equity market bubble driven by ‘AI’ -heap.” Economics added.
This central scenario is based on policy continuity in the US.
“If former President Donald Trump is elected, we expect the dollar to appreciate, at least in the short term, on expectations of higher rates and U.S. interest rates.”
On balance, Capital Economics predicts the year will end slightly stronger this year, before falling to around 98 by the end of 2025.
At 08:35 ET (12:35 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.1% lower at 100.489.
