BCA Research predicts US dollar rebound amid global trade concerns by Investing.com

BCA Research provided insights into anticipated monetary policy actions by central banks in China and the United States. The research firm expects Chinese authorities to lower interest rates on existing mortgages as the Federal Reserve begins its monetary easing cycle.

According to BCA Research, a potential 100 basis point cut in China’s mortgage rates could save Chinese homeowners about RMB 300 billion ($44.7 billion) annually in interest payments.

Despite these potential savings, BCA Research suggests the impact on China’s wider economy would be limited. The firm points out that subdued consumption is likely to persist due to a weak labor market outlook, slower income growth and households’ reluctance to take on new debt.

BCA Research also commented on (RMB)’s recent appreciation, deeming it unsustainable over the next six months. The firm believes that even with the easing of the Federal Reserve, it is unlikely that the US economy will be removed from a recession. In this context, BCA Research sees the US dollar as a counter-cyclical currency that is expected to rebound.

Looking ahead, BCA Research anticipates that a US recession could evolve into a contraction in global trade by early 2025. The firm points to China’s economic vulnerability to such a downturn, which could negatively affect the value of the RMB.

Moreover, BCA Research predicts that China will continue to face disinflationary or deflationary pressures, requiring the central bank to keep policy rates low. This low interest rate environment, along with modest growth, is expected to prevent any significant appreciation of the Chinese yuan against the US dollar.

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