The US Dollar fell on Friday, erasing gains made in the previous session that had been driven by stronger-than-expected PMI and jobless claims figures.
Despite those encouraging data points, markets remain wary after the House narrowly passed President Trump’s tax bill on Thursday, which could add to the national debt.
This has reinforced fears of long-term fiscal instability, particularly following Moody’s recent downgrade of the US sovereign credit rating to Aa1.
Concerns about the fiscal situation have also had an impact on demand for US assets, with the yields on long-term Treasury securities reaching multi-month highs earlier in the week. Adding to the uncertainty, risks persist around tariff talks.
Looking ahead, all eyes are on Fed Chair Jerome Powell’s speech on Sunday, which could provide clarity on how the central bank views the interplay between inflation risks and mounting fiscal pressures. Dovish remarks could potentially exert pressure on the currency, while a cautious stance could temporarily support the dollar.
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