Nordea Cautions Medium-Term Dollar Decline Looms Amid US Economic Weakening

Nordea strategists have expressed concerns about the medium-term prospects of the US Dollar. According to them, while the near-term outlook is relatively balanced, with both appreciation and depreciation possible over the remainder of the year, the longer-term view remains negative.

The strategists highlight several factors that could weigh on the Dollar's value. These include recent weaker US data, shifting Federal Reserve expectations, low foreign exchange volatility, yield-curve steepening, rising term premium risks, and stretched US asset valuations.

The combination of these factors is expected to outweigh the support from a relatively resilient US economy, ultimately leading to a weakening Dollar over time. The strategists expect the yield curve to steepen further over the next two years, which should also contribute to the Dollar's decline.