As U.S. President Donald Trump prepares to roll out new tariffs, investors are shifting away from the U.S. dollar, showing increasing bearish sentiment toward the greenback. Experts, including Joseph Brusuelas, chief economist at RSM U.S., suggest that currency traders are increasingly bearish on the dollar and more optimistic about the currencies of the U.S.’s major trading partners. While the dollar index has remained relatively stable in recent days, the longer-term outlook points to potential weakness as market players react to the looming trade war.
The dollar, traditionally seen as a haven due to its status as the world’s reserve currency, is now facing challenges. The potential tariffs, which could increase trade tensions, are expected to make U.S. exports more expensive while reducing the competitiveness of U.S. companies abroad. Several analysts believe that the dollar’s strength could be short-lived, with some forecasting that currencies such as the euro, British pound, and currencies from Australia and New Zealand could see gains in the face of U.S. tariff policies.
Currency positioning signals a shift in investor confidence, with increasing interest in the euro as a hedge against dollar weakness. Bank of America’s Athanasios Vamvakidis and other experts predict that while the dollar might see a brief rally in the short term after tariffs are implemented, this is likely to be a “sell” opportunity. Analysts are concerned that the tariffs could lead to stagflation, a mix of stagnation and inflation, which would further hurt the dollar in the longer term. They also predict that the euro could reach $1.15 by the end of this year and rise to $1.20 in 2026.
Other currencies, particularly the British pound, could also benefit from the tariff escalation. The U.K., which has been targeted less by the Trump administration’s tariff threats, may be spared the worst of the trade war, making the pound an attractive alternative for investors. Moreover, Australia and New Zealand’s currencies could also see upside, driven by stronger economic fundamentals and lower debt-to-GDP ratios. Overall, market experts expect the U.S. dollar to remain under pressure as global dynamics shift in response to Trump’s tariff policies.
Source: cnbc