Wells Fargo, Standard Chartered Warn of US Dollar Decline Amid Fiscal Concerns, 7% Drop in DXY

Two prominent banking institutions have recently expressed significant concerns about the future of the US dollar. Wells Fargo's macro strategist, Erik Nelson, has taken a bearish stance on the dollar, predicting that it will depreciate in the coming months. Nelson's outlook is based on several factors, including the anticipated slowdown of the US economy, the Federal Reserve's potential rate cuts, and a shift away from US assets. He also highlighted concerns about the independence of the Federal Reserve, suggesting that these issues will become more prominent in the second half of the year.

Meanwhile, Standard Chartered's head of global G10 FX Research, Steve Englander, has voiced similar concerns. Englander is particularly worried about the dollar's role as a safe-haven asset, citing America's deteriorating balance sheet and the government's continued printing of large budget deficits. He compared the situation to a betrayal of confidence, noting that investors are becoming increasingly cautious about holding US assets due to long-term fiscal concerns. Englander's perspective has shifted significantly in recent months, with the market now focusing more on the long-term fiscal path rather than immediate stimulus and funding.

The US Treasury Department's data reveals that the country has spent $1.31 trillion more than it collected so far this fiscal year, which runs from October 1st, 2024, to September 30th, 2025. This figure represents a $242 billion increase compared to the deficit recorded during the same period last fiscal year. The US dollar index (DXY), which measures the USD against a basket of foreign currencies, has declined by over 7% since February, reflecting the growing concerns about the dollar's strength.

The bearish outlook on the US dollar from these banking giants underscores the broader economic uncertainties and fiscal challenges facing the country. As the market reacts to these concerns, the dollar's standing as a safe-haven asset and its long-term value are increasingly called into question. Investors and analysts will be closely monitoring these developments, as they could have significant implications for global financial markets and the US economy.