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As summer approaches, Bank of America is issuing a stark warning: the U.S. dollar may see continued declines after already experiencing significant depreciation this year. The dollar index, which tracks the greenback's value against major currencies, has plummeted nearly 9% to 99.74 amid concerns largely driven by trade policy uncertainties.

The potential weakening of the dollar is considered positive for dollar-denominated assets such as gold and bitcoin. Following President Donald Trump's tariff initiatives, there's been a marked shift away from U.S. assets, contributing to the dollar's decline, and experts at Bank of America believe this trend is likely to persist.

Athanasios Vamvakidis, leading the global FX research team at Bank of America, outlined in a report to clients that tariffs could be more harmful to the U.S. economy due to its significant trade volume with the rest of the world. Despite President Trump's tax cuts and the abandonment of extreme fiscal spending cuts lending some support to the economy, the report underscores that negative factors take precedence.

“Policy uncertainty continues to loom, impacting corporate decisions on hiring and investment,” the report mentioned. Companies might delay these plans until there's clarity on the policy front. Additionally, the market adversely reacts to fiscal policy easing, especially when national debt levels are peaking, causing borrowing costs to rise.

Economic indicators are painting a grim picture as well. High-frequency data such as the ISM indexes and the weekly Dallas Fed economic index suggest a potential economic slowdown. After a minor uptick in early April, the Dallas Fed index has resumed its downward trajectory, hitting its lowest point since December.

While these high-frequency indicators are known for their volatility, strategists from the bank believe they could still indicate an impending economic downturn. The combination of tariff impacts, policy uncertainty, and an over-leveraged economy seem poised to continue weighing heavily on the U.S. dollar, making for a potentially rough summer ahead.