Title: US Dollar Weakens After Federal Reserve's Dovish Shift, Capital Economics Predicts Further Decline with Trump Win as Wild Card
Investing.com - In a recent note dated Sept. 26, Capital Economics analysts have forecasted that the US dollar will continue to weaken against major currencies, with a potential wild card being a Trump win. Despite being close to the bottom of its post-2022 range, the greenback may see a period of consolidation in the near term before further declines.
The central scenario outlined by Capital Economics predicts a slight weakening of the greenback over the course of 2025, driven by falling short-term interest rates and strong risk sentiment amid a global recovery and a stock market bubble fueled by 'AI' optimism. However, this outlook is contingent on policy continuity in the US.
If Donald Trump is re-elected, the analysts anticipate the dollar to appreciate in the short term due to expectations of higher tariffs and US interest rates. Capital Economics forecasts the Dollar Index to end the year slightly stronger before falling to around 98 by the end of 2025.
As of 08:35 ET (12:35 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower at 100.489.
Analysis: The US dollar is expected to weaken further in the coming years, presenting potential opportunities and risks for investors. A Trump win could impact the currency's trajectory, leading to short-term appreciation. Understanding these dynamics can help individuals make informed decisions about their finances and investments, ensuring they are prepared for potential shifts in the global economy.