The U.S. dollar weakened against major currencies like the euro and Swiss franc on Monday, as concerns over rising government debt and uncertainty around trade negotiations weighed heavily on market sentiment. Investors were particularly apprehensive about the Senate Republicans’ efforts to push forward President Trump’s ambitious tax-cut and spending plan, which is expected to add $3.3 trillion to the national debt. This potential deficit expansion contributed to bearish sentiment toward the greenback.
Deficit Fears and Trade Uncertainty Weaken Dollar, Boost Euro and Swiss Franc
The euro gained 0.28% against the dollar, while the Swiss franc appreciated by 0.44%, putting the dollar on track for a monthly loss of 3.4% against the franc and 3.6% against the euro. Eugene Epstein of Moneycorp attributed the dollar’s weakness to both deficit fears and uncertainty surrounding ongoing trade discussions. These developments added to investor caution, driving demand for traditionally safer currencies like the franc and euro.
Dollar Slides on Deficit Worries and Trade Turmoil, Hits Multi-Decade Lows Against Major CurrenciesTrade negotiations remained a focal point of investor concern. Treasury Secretary Scott Bessent warned that countries might still face increased tariffs by July 9, regardless of their negotiation status. Meanwhile, the U.S. and China reached a resolution regarding rare earth mineral shipments, slightly improving relations. However, inconsistent policy decisions, such as President Trump reversing course on Canada, continued to rattle markets and undermine confidence in the dollar’s stability.
Broader Dollar Weakness Continues as Yen, Loonie Strengthen and Global Trade, Fiscal Concerns Fuel Longest Slide Since the 1970s
The Japanese yen rose slightly against the dollar, which was down 0.19% to 144.33 yen. Meanwhile, Canada postponed a planned digital services tax aimed at U.S. tech firms, a move seen as an effort to restart stalled trade talks with Washington. The Canadian dollar (loonie) gained 0.36% against the greenback, extending its streak to five straight months of appreciation, reflecting relative market optimism about Canada’s trade prospects and fiscal position.
The dollar index, which tracks the greenback against a basket of six major currencies, fell 0.15% to 97.05, positioning it for its sixth consecutive monthly loss and its worst half-year performance since the 1970s. Sterling slipped slightly by 0.12%, while the Australian dollar rose 0.52% against the greenback. As Epstein noted, market sentiment is being tossed among various major concerns—from U.S. fiscal policy and trade negotiations to geopolitical tensions—creating an environment of ongoing volatility for the dollar.
