Sunday, 14 September 2025
Jakarta
--:--
Tokyo
--:--
Hongkong
--:--
New York
--:--
Dollar continues to fall; sterling gains after inflation rise
Wednesday, 21 May 2025 16:35 WIB | US DOLLAR |DOLLAR

The U.S. dollar fell further Wednesday, continuing to head lower on uncertainty over President Donald Trump's tax bill, while sterling jumped after a hot inflation report.

At 04:30 ET (08:30 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, fell 0.4% to 99.595, extending a 1.3% two-day decline.

U.S. tax bill, G7 meeting in focus

President Donald Trump's tax cut and spending bill has apparently run into opposition from several dissenting lawmakers, and faces a critical stress test on Wednesday as Republicans in the U.S. House of Representatives try to overcome internal divisions.

The bill, if approved, could add $3 trillion to $5 trillion to the country's debt, according to nonpartisan analysts, and comes after Moody's downgraded its U.S. credit rating by a notch last week over growing national debt.

Ballooning fiscal debt, trade frictions, and weakened confidence have dragged the dollar around 8% lower so far this year.

Traders are also wary of holding dollars ahead of the Group of Seven finance ministers' meetings currently underway in Canada, which will end on Thursday

"There is a low probability-high impact of any suggestions that the G7's longstanding commitment to allow free floating of exchange rates might be revised to allow dollar weakening," said analysts at ING, in a note.

"If current speculation proves accurate – and the U.S. is pushing for stronger trading partner currencies – it could not only prompt sharp appreciation in those currencies but also weigh on the dollar more broadly."

Sterling gains on hit inflation release

In Europe, GBP/USD rose 0.2% to 1.3419, with sterling surging after data released earlier Wednesday showed that British inflation surged by more than expected in April.

The annual rate of consumer price growth leapt to 3.5% in April from 2.6% in March, the Office for National Statistics said, the highest reading since January 2024 and the largest increase in the rate since 2022 when inflation was rocketing.

However, "a closer look at the data shows that most of the jump can be traced back to a spike in road tax, which had an outsized effect, along with higher airfares and package holiday prices, both of which were skewed by the timing of Easter and the specific measurement day in April," ING said.

"While expectations for a June hold are all but cemented, it doesn't look like enough to dismiss an August cut."

EUR/USD traded 0.4% higher to 1.1324, with the euro benefiting from traders looking for alternatives for the weakening dollar.

The euro gained despite a conversation between U.S. President Donald Trump and Russian President Vladimir Putin yielding no progress in ending the war in Ukraine.

"The next key level is 1.150, but markets may want to back such a level with softer US data and perhaps a more optimistic story on Russia-Ukraine. For now, it seems a bit premature, and we prefer 1.130 as a near-term target," said ING.

Yen gains after trade data

In Asia, USD/JPY traded 0.3% lower to 144.08, after data on Wednesday showed that Japan's trade balance contracted unexpectedly in April, as heightened U.S. tariffs and a stronger yen dampened export growth, while imports held up slightly better than anticipated.

USD/CNY traded 0.2% lower to 7.2083, with the yuan benefitting from dollar weakness.

China's commerce ministry on Wednesday criticized new U.S. curbs on Chinese chips, specifically opposing efforts to ban Huawei chips globally. Beijing recently warned that such moves could jeopardize the 90-day trade truce.

AUD/USD rose 0.4% to 0.6442, after falling in the previous session as the Reserve Bank of Australia cut interest rates by 25 basis points on Tuesday.

Source: Investing.com

RELATED NEWS
US dollar rises on positioning moves, but outlook remains bearish...
Saturday, 13 September 2025 02:08 WIB

The U.S. dollar rose on Friday, a day after falling on a surge in U.S. jobless claims and modest inflation, as investors expected the Federal Reserve to cut interest rates next week after a roughly ni...

Jobless Claims Surge, Dollar on the Brink...
Friday, 12 September 2025 09:05 WIB

The US dollar weakened on Friday after a surge in jobless claims and a moderate rise in inflation made markets increasingly confident that the Fed would cut interest rates next week—and possibly furth...

Dollar Sideways, CPI Risks Ahead...
Thursday, 11 September 2025 08:24 WIB

The US dollar held steady early in the Asian session after the PPI data fell 0.1% in August, reinforcing expectations that the Fed would cut interest rates next week. The Dollar Index edged up to 97.8...

Dollar Strengthens as Geopolitics Heats Up; Investors Await US Inflation Data ...
Wednesday, 10 September 2025 15:56 WIB

The US dollar held steady on Wednesday (September 10th) ahead of US inflation data this week that could help shape the Federal Reserve's policy outlook, while tense geopolitical conditions supported c...

Dollar Steadies Ahead of Inflation Data...
Wednesday, 10 September 2025 09:35 WIB

The dollar index held around 97.8 on Wednesday after firming in the prior session, as investors awaited key inflation reports that could influence the Federal Reserve's policy stance. The producer pr...

LATEST NEWS
EUR/USD steadies as Fed rate cut bets firm amidst US labor market concerns

EUR/USD remains steady during the North American session on Friday, poised to end the week with modest gains of over 0.18% as traders brace for the next week's monetary policy decision by the Federal Reserve (Fed). At the time of writing, the pair...

Bessent met with BlackRock's Rieder as search for next Fed chair continues

U.S. Treasury Secretary Scott Bessent met with BlackRock Inc executive Rick Rieder in New York on Friday, as the Trump administration continued its search for a new chair for the Federal Reserve, a source familiar with the matter said. Bessent has...

Oil gains weighed down by US demand worries

Oil prices rose on Friday after a Ukrainian drone attack suspended loadings from the largest port in western Russia, but gains were capped by concerns about U.S. demand. Brent crude futures settled at $66.99 a barrel, up 62 cents, or 0.93%. U.S....

POPULAR NEWS
IMF says Fed has scope to lower interest rates
Friday, 12 September 2025 01:38 WIB

The International Monetary Fund on Thursday said the Federal Reserve has scope to lower interest rates because of the weakening U.S. labor market,...

Breaking News: US CPI Inflation Rises to 2.9% in August, Matching Forecasts
Thursday, 11 September 2025 19:44 WIB

Annual inflation in the United States (US), as measured by changes in the Consumer Price Index (CPI), rose to 2.9% in August from 2.7% in July, the...

Michigan Consumer Sentiment Index Expected to Weaken Further in September
Friday, 12 September 2025 19:39 WIB

The University of Michigan (UoM) is expected to release the preliminary reading of its monthly Consumer Confidence Index for September on Friday....

Nasdaq closes at record high, S&P 500 notches winning week as Fed decision looms
Saturday, 13 September 2025 03:37 WIB

The Nasdaq Composite notched a perfect week of closing highs on Friday as investors took signs of weakening jobs and tame inflation to mean the...