BofA: 6 reasons to stay bearish on the USD despite the US-China truce

Whereas a short lived truce between the U.S. and China has supplied some reduction to markets, BofA maintains a bearish outlook on the greenback. The current bounce is seen as tactical quite than structural, with longer-term headwinds intact.

Key Factors:

1. Coverage uncertainty persists:
   The pause in commerce tensions is momentary. Coverage route stays erratic and will reintroduce volatility later this summer season as deadlines and tariff suspensions expire.

2. Lingering financial drag:
   Even with de-escalation, the U.S. economic system is now on a slower progress path than pre-trade conflict as a consequence of delayed funding and weakened enterprise confidence.

3. Present account deterioration:
   A narrowing U.S. present account surplus is lowering funding inflows and undermining assist for the greenback.

4. Overseas asset reallocation:
   Institutional actual cash buyers are reassessing publicity to U.S. property and the greenback, contributing to persistent capital outflows.

5. Fiscal uncertainty:
   An unpredictable fiscal trajectory provides threat, with potential implications for long-term Treasury issuance, inflation expectations, and investor sentiment.

6. Weaker-dollar bias from policymakers:
   The Trump administration continues to favor decrease charges and a softer greenback, which provides to long-term depreciation pressures.

Conclusion:

BofA stays bearish on the USD, regardless of tactical reprieves. Structural forces—starting from weaker capital inflows to coverage unpredictability—are seen as more and more troublesome to reverse, suggesting a decrease greenback over the medium time period with a choppier path ahead.

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