Bank of America Forecasts Further U.S. Dollar Slide in Summer Months

Bank of America Forecasts Further Weakness for U.S. Dollar This Summer

The U.S. dollar has faced significant pressure this year, and Bank of America warns the decline may accelerate in the coming months.

The dollar index, which measures the greenback’s value against other major currencies, has fallen nearly 9% to 99.74 in 2025. Much of this drop is linked to escalating trade tensions sparked by President Donald Trump’s tariff policies, prompting investors to reconsider their exposure to U.S. assets.

In a recent client report, Bank of America’s FX research team, led by Athanasios Vamvakidis, highlighted how tariffs are increasingly hurting the U.S. economy. Given America’s deep integration into global trade, higher tariffs could further dampen growth prospects.

Despite some positive economic developments—such as tax cuts and the avoidance of harsh spending reductions—uncertainty around trade policy remains a key risk. Businesses may hold back on hiring and investment until the policy landscape becomes clearer.

The report also warns that tariffs are expected to rise beyond current levels, compounding existing challenges. This comes as fiscal policy loosens amidst record-high government debt, pushing borrowing costs upward. Meanwhile, the Federal Reserve’s options to counter inflation are limited by rising expectations for price increases.

Recent economic data, including the ISM manufacturing index and the Dallas Fed’s weekly economic activity gauge, point to slowing momentum. The Dallas Fed index recently dropped to its lowest level since December 2024, indicating a potential slowdown ahead.

While short-term indicators can fluctuate, Bank of America’s outlook suggests the dollar may continue to weaken throughout the summer, benefiting assets priced in dollars like gold and bitcoin.