After Trump’s words, the US dollar may fall further

The dollar was in a bear market on Wednesday, market watchers said, with one warning that the weakening U.S. economy was a “double-edged sword” for the U.S. economy.

Tuesday The dollar saw its worst one-day drop since April — amid Trump’s so-called “Liberty Day” remarks. Sells America trade. The decline came after the president told reporters in Iowa that he believed the dollar was “very good.”

The US dollar indexAfter falling more than 9% in 2025, the greenback, which measures the greenback, is down 2.2% against a basket of major rivals.

Trump has been outspoken about the benefits of the long-depreciated U.S. dollar for international trade flashed countries that intervene in foreign exchange markets to lower the value of their currency relative to the greenback.

“It doesn’t sound good, but you make a lot more money with a weak dollar than a strong dollar,” he said said In July, the ideal scenario is a moderately weak dollar rather than a very weak dollar. A strong dollar will reduce tourism and mean American suppliers “can’t sell anything,” he said.

A weak dollar can boost the domestic economy, for example by making American goods more attractive to overseas buyers and boosting exports, or by increasing the value of foreign earnings of American firms when converted back into US dollars.

Despite Trump’s insistence that the dollar’s decline is “great” news for the U.S., a weaker currency also has downsides — more expensive imports or a loss of investor confidence.

Speaking on CNBC’s “Squawk Box Europe” on Wednesday, ADP Chief Economist Nela Richardson called the dollar’s decline a “double-edged sword.”

“(It) makes U.S. exports more competitive abroad, but a weak dollar at home doesn’t always win markets confidence,” he said. “And that confidence will be critical given the other things that are a struggle for the U.S. economy, such as sticky inflation, high deficits and debt, and the need to sell Treasuries both domestically and abroad.”

Richardson argued that the dollar’s decline means that the “conundrum of the US economy” has become increasingly complex.

“The headline numbers don’t tell the whole story, and a weaker dollar is a sign that the story is breaking, even if the headline numbers are objectively strong,” he said, referring to data such as the unemployment rate and economic growth.

“If you don’t know anything about last year, but just look at the headline numbers … you would picture a very strong U.S. economy offering a strong dollar and a non-declining interest rate policy, which we don’t find today,” he said.

Asked what the customer’s confidence is fell down It hit its lowest level in more than a decade this month — the reason markets are worried about the reading when other areas of the economy look strong, Richardson said.

“This is a K-shaped “The pattern of consumer spending, where the top 20% of earners drive most of the spending in the United States, and the bottom quartile of consumers are struggling with high rates of inflation,” he told CNBC. “The numbers look good, but underneath is all the action.”

This was also evident in the labor market, Richardson added.

“(This) reflects the K-shaped consumer, who sees hiring in health care services, which are expensive services for most consumers in the United States, and leisure and hospitality, which are discretionary services for all consumers,” he explained. “So if you’re well-heeled, this economy is great for you, if you’re not, it’s a struggle.”

Cole Smead, CEO and portfolio manager at Smead Capital Management, told CNBC’s “Squawk Box Europe” on Wednesday that he expects the dollar selloff to continue.

“We are in a dollar bear market for the long term,” he said. “The reason I say that is if you go back and look at these ‘American manias’ (in the markets), the telecom bubble and the tech bubble of the late 1990s, the dollar peaked in 2002 and within six years you saw the dollar hit a low that (a) hadn’t been seen in a very, very long time.”

From the 2002 high to the 2008 low, the US dollar index fell by about 41%.

“It’s only been six years,” Smed said. “I want to point this out because it’s the year 2000 when the US stock market peaked, so stop this mania and it’s a capital flow problem.”

The past decade has seen huge capital flows to the US, with the AI ​​boom attracting new flows of capital to US markets. Smed noted that 70% of the MSCI World Index currently consists of US stocks.

“We’re going to see the dollar struggle because of capital account movements overseas as money eventually goes elsewhere (investors) looking for better returns,” Smed added.

In a note on Wednesday, TS Lombard’s Daniel von Ahlen agreed that the dollar is poised to move lower despite the recent sell-off being unexpected.

“Strong global risks, rising raw material prices, Odds are up for Rick Reeder As the next Fed chair, and Trump’s recent spat with Europe over Greenland, was a torpedo for an otherwise resilient 1Q for the greenback, he said.

He said that the US GDP forecast was revised and that “Trump repeated TACOing,” supported the stability of the dollar in the second half of 2025.

“Strong growth in the U.S. this year is the consensus. Generally, other (developed markets) should have more room to meet growth forecasts, which would strengthen the dollar’s bearish position,” Von Ahlen said. “At the same time, the dollar still trades at a rich premium to many valuation metrics, making it vulnerable to further declines.”