On Thursday, BCA Research, a prominent financial research firm, shared insights into the future of the U.S. dollar, forecasting a potential decline by mid-2025.
Marko Papic, Chief Strategist & Senior VP 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 anticipates that the combination of high U.S. Treasury bond yields and a growing budget deficit will compel the President to moderate his aggressive fiscal policies, which could ultimately weaken the dollar.
The strategist pointed out that the U.S. government’s reliance on stimulative fiscal policies to bolster American assets is unsustainable, and he expects the dollar to start declining once the reality of government spending becomes 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 while the dollar could potentially revisit its 2022 highs of 113 on the dollar index in the short term, Trump’s fiscal approach will face significant hurdles within 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 on his promised tax cuts and trade tariffs. These policy shifts, which the markets have been counting on to maintain the strength of the dollar, could lead to disappointment and contribute to the currency’s eventual decline.
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