The weakening U.S. dollar hits multi-year lows against major currencies, driven by Fed rate cut expectations

From Financial Modeling Prep: 2025-06-30 08:04:00

The weakening U.S. dollar hit multi-year lows against major currencies, driven by expectations of Fed rate cuts and positive trade developments. The Dollar Index dropped to 97.083, near a three-year low, with USD/JPY falling, EUR/USD near a four-year high, GBP/USD rising, and USD/CHF at a decade-low.

Trade progress, including nearing a tariff deal with China, revoking Canada’s digital tax, and ongoing talks with Japan and the U.K., added pressure on the dollar as investors shifted focus to risk assets. Reduced global uncertainty and trade optimism dampened the dollar’s appeal as a safe-haven currency.

Fed Chair Powell’s dovish stance and Trump’s pressure on rate cuts raised expectations for a September cut to 91.5%. Trump’s criticism of Powell and desire for a 1% rate, along with the potential of appointing a more dovish Fed chair, added to the Fed’s credibility strain.

The upcoming U.S. Jobs Report on Friday poses asymmetric risks for the dollar, with weak numbers likely causing a dollar rout. Strong labor data could delay a rate cut, while a weak report may solidify expectations for a September cut, according to analysts.

Fiscal risks from Trump’s proposed tax and spending bill, estimated to add $3.3 trillion to the national debt over 10 years by the CBO, further weigh on long-term dollar confidence. With dovish Fed signals, trade optimism, and fiscal concerns looming, the dollar’s outlook hinges on upcoming data, tax reform, and Fed statements leading to the July FOMC meeting.



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