Wall Street warns: US Dollar may weaken further amid rate cuts

The US dollar, long considered the world's dominant reserve currency, is showing signs of vulnerability. Major Wall Street institutions, including Morgan Stanley, JPMorgan Chase, and Goldman Sachs, are warning of a potential systemic decline in the dollar's strength. These institutions are concerned about a combination of domestic economic pressures, shifting monetary policy, and rising geopolitical tensions.

Experts suggest that this is not a short-term dip, but rather the beginning of a broader transformation in the global financial system. According to Bloomberg, the world may be on the verge of a significant reorientation of capital flows.

Reason #1: The Fed's monetary policy is preparing the dollar for a decline

One of the key factors undermining the dollar's strength is the Federal Reserve's expected reduction in interest rates. Morgan Stanley predicts that the dollar index will fall by 9% to 91 by mid-2026. This will bring the value of the US currency closer to levels last seen during the pandemic.

The bank estimates that the yield on 10-year US government bonds will fall to 4% by the end of 2025. It may further decline in 2026 in the face of a planned 175-basis-point cut in the Fed's interest rate. These conditions make US assets less attractive to global investors.

Reason #2: Trump's policies scare foreign capital away

In addition to monetary factors, markets consider political risks when making forecasts. Donald Trump has declared his intention to return to the White House and has announced plans for new tariffs and tax changes. If implemented, these changes could significantly impact foreign investment flows to the United States.

According to Goldman Sachs, changes in tax policy toward foreign investors will only deepen distrust of US assets. The bank's analysts estimate that the dollar is currently overvalued by about 15%, indicating room for further decline.

Reason #3: Declining market confidence and global diversification

Changes in the global economy are prompting countries to seek alternatives to the dollar. The growth of Asian economies, the strengthening of the euro, the yen's return to stability, and the general trend toward multi currency are creating new rules of the game.

"We think a medium-term narrative around a weaker dollar is building," said Aroop Chatterjee, a currency strategist at Wells Fargo in New York.

In other words, investors are reacting not only to short-term risks but also changing their long-term capital allocation logic.

In what ways is this currently presenting itself?

The dollar is already showing signs of weakening. According to Bloomberg, it fell by 0.5% against the currencies of the G10 countries in early June, reaching its lowest level since July 2023 on the Bloomberg Dollar Spot Index.

Morgan Stanley believes that this is just the beginning. According to their forecasts:

• the euro will rise to $1.25 (from the current $1.14);
• the pound sterling — to $1.45;
• the yen will strengthen from 143 to 130 per dollar.

JPMorgan also recommends betting on the strengthening of the yen, euro, and Australian dollar as more stable alternatives.

Why it is important for the world

The dollar's decline could have large-scale consequences for the global economy:

1. Cheaper US imports — could stimulate domestic production in the United States.
2. More expensive debt service in dollars for developing countries.
3. Redistribution of capital — investors will look for new markets with more reliable policies.
4. Revision of foreign exchange reserves — central banks may reduce the share of the dollar in favor of gold, yuan, or euro.

Financial markets are already signaling a period of high volatility ahead. In the short term, political uncertainty in the United States and key interest rate decisions could cause significant disruption. In the medium term, the process of gradually diversifying global reserves and reassessing traditional currency pegs will begin.

As we mentioned, Bitcoin and gold have recently been competing for the title of the most reliable safe-haven asset that protects investors from inflation. Both showed growth at the end of 2024, but changes occurred in 2025. JPMorgan analysts predict that, by the end of this year, Bitcoin will demonstrate superior growth dynamics compared to gold.

As a reminder, we wrote that according to Bloomberg, investments in CS2 skins have yielded 41% per annum — more than traditional assets such as gold (with a much lower Sharpe ratio of 0.12) or even Bitcoin (0.21).