The U.S. dollar to stay under pressure over the coming months, analysts predict. A Reuters poll of FX experts points to a weaker dollar caused by multiple economic challenges. These include mounting debt concerns, uncertain tariff policies, and rising expectations of Federal Reserve rate cuts.
Investor confidence in dollar assets has dropped sharply in recent months. The tax-cut and spending bill that adds $3.3 trillion to U.S. debt fuels growing unease. President Donald Trump’s shifting tariff decisions add further market volatility.
The surge in the “term premium,” or compensation investors demand for holding long-term debt, also weighs on the dollar. This factor has pushed the dollar down nearly 11% against major currencies this year. The euro and sterling reached three-and-a-half-year highs against the dollar recently.
Data from the Commodity Futures Trading Commission shows a near two-year high in short-dollar trades. More than 80% of surveyed FX analysts expect this trend to continue or increase by July.
Most analysts believe the dollar’s safe-haven appeal has diminished. Jennifer Lee, senior economist at BMO Capital Markets, expects the dollar to weaken further. She points to inflation from tariffs and budget deficits hurting the economic outlook.
Trump continues to demand deep, immediate Fed rate cuts. Meanwhile, Fed Chair Jerome Powell remains cautious. Powell wants to “wait and learn more” about tariffs’ inflation impact before changing rates.
Tariff negotiations remain a major focus. Nearly 37% of respondents in the survey said tariffs will most affect the dollar in the near term. The July 9 expiration of a 90-day tariff pause will intensify scrutiny.
Other factors include interest rate differences, portfolio diversification, and Fed independence debates. The euro has risen nearly 14% this year and is expected to maintain strength against the dollar.
FX strategists say steady dollar selling, especially from European investors, signals structural challenges ahead. Overall, the U.S. dollar to stay under pressure as these economic forces play out.
For more business updates, visit DC Brief.
