Bank of America warns that the US dollar could be a tough summer as it has already dropped significantly this year.
The dollar index, which tracks the value of the US dollar against major currencies, fell from nearly 9% to 99.74 this year, as President Donald Trump’s tariff war caused a transition from US assets.
Bank of America is hoping for moreBTC$104,848.00.
The Global FX Research Team, led by Athanasios Vamvakidis, said in a report to clients on Friday that tariffs are more harmful to the US economy as countries trade more with the world than any other country.
The report acknowledged recent resilience in the US economy and developments in support of growth, such as President Donald Trump’s tax cuts and abandonment of extreme fiscal spending cuts, but said it “negatives will control it.”
“Policy uncertainty remains on multiple fronts. Companies may suspend employment and investment plans until they become more clear. In most scenarios, we believe tariffs are much higher than the starting point because the current levels are minimal,” the report said.
It added that it had responded negatively to slacking in fiscal policies at a time when debt levels were at record highs, leading to an increase in borrowing costs. Meanwhile, the Federal Reserve cannot take important action due to rising expectations of inflation.
“The movement flow has collapsed. It rose before tariffs in the first quarter (frontrunning), but it may be approaching,” the strategist points out the weakness of high-frequency indicators such as the ISM data and the weekly Dallas FED Economic Index.
According to Data Source TradingView, the weekly Dallas FED Economic Index resumed its downtrend following a short spike in early April, reaching its lowest since December.
“Though these high-frequency indicators tend to be very noisy, they could point to a slower economy in the coming months,” the strategist said.
Dallas FED Economic Index every week. (TradingView)
