Dollar Stays Near Multi-Year Lows as Markets Focus on Fed Signals and Trump’s Spending Plan
The U.S. dollar remained near its weakest levels since February 2022 against a basket of major currencies on Wednesday, as traders assessed dovish comments from Federal Reserve Chair Jerome Powell and the potential economic impact of President Donald Trump’s large-scale spending bill.
The greenback hovered close to its lowest since September 2021 versus the euro, and neared its weakest level since January 2015 against the Swiss franc.
Speaking at the European Central Bank’s annual conference in Sintra, Portugal on Tuesday, Powell emphasized a patient approach to interest rate cuts, though he left the door open for a possible cut as early as the upcoming policy meeting, depending on incoming data. That puts added pressure on Thursday’s non-farm payrolls report, a key indicator of labor market strength.
Data from the JOLTS report released Tuesday suggested continued resilience in the U.S. labor market, briefly lifting the dollar off its lows.
The U.S. Dollar Index, which tracks the currency against six major peers, edged up slightly to 96.744, not far from its overnight low of 96.373.
Meanwhile, attention remains on Trump’s $3.3 trillion tax-and-spending bill, which passed the Senate and now awaits final House approval. Analysts say the size of the package is contributing to downward pressure on the dollar.
“This level of government spending, well beyond what’s sustainable, isn’t encouraging for the Treasury market and is arguably part of why the dollar is weakening,” said Rodrigo Catril, strategist at National Australia Bank.
Adding further strain, Trump has continued his public criticism of Powell, raising concerns about the Federal Reserve’s independence. Earlier this week, Trump shared a handwritten note comparing global interest rates and insisted the U.S. benchmark rate should be closer to those of Japan (0.5%) and Denmark (1.75%), adding Powell was “as usual, too late.”
In currency markets:
- The dollar held at 0.7917 Swiss franc, after briefly dipping to 0.7873 in the prior session.
- The euro slipped slightly to $1.1791, staying near Tuesday’s high of $1.1829.
- Sterling was flat at $1.3739, just below its October 2021 high of $1.3787.
- The dollar gained 0.2% against the yen to 143.68, recovering from a 0.4% loss the day before.
“Over time, I expect the dollar to continue a slow, steady decline as confidence in the Fed’s independence erodes,” wrote Michael Brown, strategist at Pepperstone, in a client note.
