U.S. dollar to stay under pressure from tariff, debt and rate cut expectations.
The U.S. dollar will remain weak over the coming months,a poll of FX analysts forecast, caught in a tangle of mounting U.S. debt concerns, erratic tariff policies and rising interest rate cut expectations.
Growing unease over President Donald Trump’s on-again off-again tariffs, and a tax-cut and spending bill that is expected to add $3.3 trillion to the national debt, have led to a scurry of investor outflows from dollar-denominated assets in recent months.
A surge in the “term premium” – compensation investors demand to hold longer-term debt – has also contributed to a nearly 11% dollar decline against a basket of major currencies this year and to a three-and-a-half-year low against the euro and sterling last week.
Recent data from the Commodity Futures Trading Commission also showed the short-dollar trade was at a near two-year high, suggesting further weakness may be in the offing.
Asked how that positioning would change by end-July, more than 80% of FX analysts in a June 27-July 2 Reuters poll, 42 of 52, said it would broadly hold or net-shorts would increase.
A majority of these same FX analysts surveyed by Reuters in April and again in May had already concluded the reserve currency’s “safe haven” shine had partly eroded.
“We are expecting a weaker U.S. dollar in the coming months,” said Jennifer Lee, senior economist at BMO Capital Markets.
Source: Investing
