Why I'm Betting Against the US Dollar—and Backing the Aussie

The US dollar continues its downward spiral—already down over 11% this year—and I don’t expect that to change. Despite talk that Trump in office would boost the dollar, I see the opposite. His tariff-heavy trade policies create confusion and drive up inflationary pressures. I’m bearish on USD and believe the second half of the year will bring further weakness, potentially dragging the DXY to 95 or lower.

Rate cuts are on the table. The Fed is signaling it's time to act. I expect 75 basis points of cuts through the second half of 2025, starting as early as next month. That’s a strong macro tailwind for risk-on currencies like the Aussie. We’ve already seen AUD/USD break above 0.66, and I’ve called for a move toward 0.68 by year-end since January. That forecast is well on track.

Locally, there’s been some confusion. The RBA hasn’t cut rates consecutively since 2010, so the market's pricing of multiple cuts feels aggressive. I don’t think we’ll see three in a row. The RBA remains more hawkish than the Fed, and that divergence adds further support for the Aussie dollar. Swaps are pricing more dovish action from the Fed than the RBA, and I expect that dynamic to play out in AUD strength.

Looking ahead, next week’s US inflation read will be pivotal. Sticky inflation—thanks to Trump’s tariffs—could give the Fed pause, but in my view, these effects are temporary. If the Fed sticks to its current guidance, we’ll see another 25 basis point cut next month, regardless of short-term inflation data. The direction is clear: the Fed is cutting, and the US dollar is likely to remain under pressure, giving the Aussie room to climb.

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