Bank of America Warns of US Dollar Decline Below Fair Value by 2026

Bank of America analysts project the US dollar could fall below fair value by 2026, citing uncertainty from Trump-era financial policies. The dollar index has already dropped 10% year-to-date—its worst first-half performance since 1980—amid slower growth and inflationary pressures from recent tariff announcements.

The greenback steadied slightly after hitting a five-week low, with the dollar index rising 0.21% to 98.355. Meanwhile, the euro shows potential for significant appreciation, with BOA forecasting a climb to $1.20-$1.25 from its current $1.1651 level.

Markets now price in a 90% probability of a 25-basis-point Fed rate cut by September, with an additional 100 basis points expected by fall 2026. This monetary policy shift could further pressure the dollar while creating tailwinds for alternative assets.