U.S. Dollar Hits Multi-Year Low Amid Fed Easing Bets and Trump’s Spending Push

The U.S. dollar slumped to its lowest level against the euro since September 2021, as President Trump’s $3.3 trillion tax-and-spending bill stirred fiscal concerns and weighed on investor sentiment. The euro surged to $1.1808, marking a near four-year high and its strongest first-half performance in history with a 13.8% gain, according to LSEG data.

Market focus is shifting to the Federal Reserve’s next move, with investors now pricing in 67 basis points of rate cuts this year. Goldman Sachs expects three 25-basis-point reductions in 2025, citing muted tariff effects and softening labor data. Traders are eyeing Thursday’s nonfarm payrolls report, which is forecast to show 110,000 new jobs in June and a rise in unemployment to 4.3%.

The dollar index fell to 96.612, its weakest since February 2022, as investors bet on a more dovish Fed. The yen strengthened to 143.77 per dollar, gaining 9% year-to-date, while sterling held firm at $1.3739. Concerns about central bank independence have grown amid Trump’s repeated attacks on Fed Chair Jerome Powell and pressure for aggressive rate cuts. Trump even sent Powell a note suggesting U.S. rates should mirror Japan or Denmark’s ultra-low levels.

Adding to the pressure, foreign demand for U.S. Treasuries has weakened, challenging the dollar’s long-standing position as the world’s reserve currency. The greenback has fallen over 10% in the first half of 2025—its steepest decline since the early 1970s.

Meanwhile, global markets remain cautious ahead of the July 9 tariff deadline. Trump has expressed frustration with Japan over stalled trade talks, while Treasury Secretary Scott Bessent warned that higher tariffs could still be imposed despite ongoing negotiations.