Bank of America has issued a warning indicating that the U.S. dollar may continue to struggle this summer, having already seen a sharp decline in value this year. The U.S. dollar index, which gauges the dollar's strength against major currencies, has decreased nearly 9% to 99.74. This downturn has been partly attributed to economic shifts resulting from tariffs set forth during President Donald Trump’s administration, prompting investors to move away from U.S. assets. The bank's global FX research team, led by Athanasios Vamvakidis, noted in a client report that the negative impacts of the tariffs are becoming more pronounced, suggesting that they are likely more harmful to the U.S. economy than previously realized.
Despite acknowledging some resilience in the U.S. economy and supportive developments like tax cuts, the report emphasized that "negatives dominate". Uncertainty surrounding economic policies is causing businesses to pause hiring and investment decisions, awaiting more clarity. The report speculates that tariffs are likely to rise, potentially leading to a further drop in the dollar’s value.
The current economic landscape is aggravated by high national debt, which raises borrowing costs, while inflation expectations hinder the Federal Reserve’s ability to respond decisively. As demand surged in the first quarter in anticipation of tariffs, analysts are now observing a potential slowdown in various economic indicators, including the Dallas Fed economic index, which dropped to its lowest level since December. Strategists warn that while high-frequency indicators like these can be volatile, they could point toward an economic slowdown in the coming months.
Despite acknowledging some resilience in the U.S. economy and supportive developments like tax cuts, the report emphasized that "negatives dominate". Uncertainty surrounding economic policies is causing businesses to pause hiring and investment decisions, awaiting more clarity. The report speculates that tariffs are likely to rise, potentially leading to a further drop in the dollar’s value.
The current economic landscape is aggravated by high national debt, which raises borrowing costs, while inflation expectations hinder the Federal Reserve’s ability to respond decisively. As demand surged in the first quarter in anticipation of tariffs, analysts are now observing a potential slowdown in various economic indicators, including the Dallas Fed economic index, which dropped to its lowest level since December. Strategists warn that while high-frequency indicators like these can be volatile, they could point toward an economic slowdown in the coming months.
