The greenback rallied yesterday after stronger-than-expected US jobs data pushed out the timing for potential rate cuts by the Federal Reserve (Fed).
The dollar index, which tracks the greenback against major peers, is headed for a second-straight weekly decline.
The Republican-controlled House of Representatives narrowly passed Trump’s “One, Big, Beautiful Bill” of spending and tax cuts that is estimated to add US$3.4 trillion to the nation’s US$36.2 trillion debt.
Trump is expected to sign the bill into law on Friday.
With the US closed for Independence Day, attention turns to Trump’s July 9 deadline when sweeping tariffs take effect on countries like Japan that have not yet secured trade agreements.
“The dynamic is raising questions about fiscal sustainability and bond market stability,” said Kyle Rodda, senior financial markets analyst at Capital.com, referring to the bill’s passage.
“However, for now, those risks are being looked through as the markets embrace signs of labour market resilience and hopes for further US trade deals,” Rodda said.
The dollar index had its worst first half since 1973 as Trump’s chaotic roll-out of sweeping tariffs stoked concerns about the US economy and the safety of Treasuries.
The US currency sank to the lowest in more than three years against the euro and British pound earlier in the week.
The dollar index edged 0.1% lower to 96.93, trimming its 0.4% advance yesterday.
The euro tacked on 0.2% to US$1.1775 EUR=, poised for a 0.5% weekly gain.
The yen climbed 0.4% to 144.40 versus the greenback.
Trump said many countries will get letters on Friday specifying what tariff rates they will face, marking a shift from earlier pledges to ink individual deals with trading partners.
European Commission president Ursula von der Leyen said the common-currency bloc was aiming for a trade agreement “in principle” with the US before the deadline.
Japan, which has been a focus of Trump’s ire of late, is reportedly sending its chief trade negotiator to the US again as early as this weekend.
On the data front, the US labour department’s closely watched employment report yesterday showed that nonfarm payrolls increased by 147,000 jobs in June, well ahead of economists’ forecast in a Reuters poll for a rise of 110,000.
“The US labour market is gradually slowing down, but the fact that it hasn’t experienced a sudden change is reassuring,” said SMBC chief currency strategist Hirofumi Suzuki.
“I personally predict that the tariff negotiations will not be very favourable, leading to continued dollar weakness and yen strength,” Suzuki said.
Market expectations that the Fed will leave rates unchanged at its July meeting are now at 94.8% probability, up from 76.2% on July 2, according to the CME’s Fedwatch tool.
Economists continue to expect the Fed would not start cutting rates again until September or even later.
Sterling rose 0.1% to US$1.3668.