Dollar weakens and approaches the minimums in four years, pressured by Trump tax project and tariffs

THE dollar American remains weakened against the euro on Tuesday, reaching its lower level since September 2021As President Donald Trump’s spending project increased tax concerns and uncertainty around trade agreements continued to weigh on market sentiment.

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Investors have also been betting on a faster pace of loosening from Federal Reserve monetary policy this year, before a series of economic data from the United States that will be released this week-especially the job report outside the agricultural sector next Thursday.

This scenario boosted the sale of dollars, leaving the euro near the maximum in almost four years at $ 1.1808. The single European currency rose 13.8% from January to June – its best performance in the first half of history, according to LSEg data.

The sterling pound remained stable at $ 1.3739, close to the maximum in three and a half years hit last week, while the Japanese yen strengthened to 143.77 per dollar. Iene accumulated 9% appreciation in the first half – its best performance since 2016.

THE dollar indexwhich measures the performance of the US currency against a basket of six other currencies, fell to 96,612 – the lower level since February 2022.

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Uncertainties affect confidence

“There are many reasons for not liking the dollar. Some are structural, such as erratic trade policies and tax risks,” said Moh Sion Yes, Bank of Singapore’s exchange rate strategist.

“These factors had already caused the weakening of the dollar, even with its relative advantage in terms of interest. But now, the risk of a federal reserve more dovish [brando] eroding this advantage is the latest source of the weakness of the dollar. ”

You investors are dealing with uncertainties Regarding US Senate efforts to approve Trump’s tax and spending project, which faces internal divisions within the party itself, especially because of the projected $ 3.3 trillion impact on national debt. These tax concerns affected the market sentiment and led some investors to diversify their portfolios.

The global reserve currency accumulates more than 10% drop – its biggest loss in the first half since the beginning of the floating exchange rate in the 1970s.

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“In 2025, the narrative of American exceptionalism was placed in check. The demand for US Treasury Securities has suffered pressure in recent months, and the appetite of foreign investors has decreased, ”said Nathan Hamilton, Aberdeen Investments fixed income investment analyst.

Trump versus the Fed

Meanwhile, Trump has constantly pressured the Fed to loosen monetary policy, sending President Jerome Powell a list of interest rates from other central banks with handwritten comments suggesting that the US rate should be between 0.5% of Japan and 1.75% of Denmark.

This continuous offensive against the Fed and Powell has generated concerns between investors about the Central Bank’s independence and credibility. Trump cannot fire Powell for politics disagreements, but publicly asked for his resignation last week.

The focus of investors will be in Powell’s statements, which participates on Tuesday in a European Central Bank forum (ECB) in Sintra, Portugal, along with other central bank leaders. The market is now pricing 67-base cuts in Fed rates later this year.

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Goldman Sachs now expects the Fed to perform three 0.25 percentage sections this year – compared to a previous prediction of only one cut in December – citing the moderate effects of tariffs and weakness in the labor market.

“The first signs indicate that the effects of tariffs are lower than we expected … and we suspect that Fed leadership shares our view that tariffs will only have a punctual impact on price level,” said bank strategists in a statement.

This Thursday’s job report is expected to show the creation of 110,000 vacancies in June, below 139,000 May, according to Reuters survey with economists. The unemployment rate should rise from 4.2% to 4.3%.

With a period of July 9 approaching the implementation of Trump tariffs, investors are also aware of US business agreements with their partners – although so far few advances have been made.

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Trump showed frustration with commercial negotiations with Japan, while Treasury Secretary Scott Bessent warned that countries can be notified of accentuated tariff increases even after good faith negotiations.