The US dollar faced downward pressure, with the dollar index falling to around 99.6 and on track for a weekly loss exceeding 1%. Concerns about the US fiscal outlook, stemming from the President’s budget bill and a credit rating downgrade, weighed heavily on the currency. Lack of progress in trade negotiations further contributed to the dollar’s weakness, although communication channels with China remain open.
- The dollar index fell to around 99.6.
- The dollar index was set to lose more than 1% for the week.
- President Trump’s new budget bill includes tax cuts and increased defense spending.
- The budget bill could further inflate the US national debt.
- The Congressional Budget Office estimates the bill will add nearly $4 trillion to the national debt.
- Moody’s downgraded the US credit rating from Aaa to Aa1.
- The downgrade cited ballooning deficits and the rising cost of servicing federal debt.
- Lack of progress in trade negotiations has prompted a shift away from US assets.
- Washington and Beijing have agreed to maintain open lines of communication.
The confluence of factors suggests a challenging period for the dollar. Fiscal worries, exacerbated by increased spending and a credit rating downgrade, undermine investor confidence. A lack of advancement in trade relations further diminishes the currency’s appeal. However, continued communication between the US and China offers a potential glimmer of hope for stability.