Dollar trims gains against euro, yen as US tariff deadline looms
The greenback rallied on Thursday after stronger than expected U.S. jobs data pushed out the timing for potential rate cuts by the Federal Reserve. 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 $3.4 trillion to the nation's $36.2 trillion debt. Trump is expected to sign the bill into law on Friday.
With the U.S. 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 U.S. trade deals."
The dollar index had its worst first half since 1973 as Trump's chaotic roll-out of sweeping tariffs stoked concerns about the U.S. economy and the safety of Treasuries. The U.S. 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 per cent lower to 96.93, trimming its 0.4 per cent advance on Thursday. The euro tacked on 0.2 per cent to $1.1775, poised for a 0.5 per cent weekly gain. The yen climbed 0.4 per cent 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 U.S. before the deadline. Japan, which has been a focus of Trump's ire of late, is reportedly sending its chief trade negotiator to the U.S. again as early as this weekend.
On the data front, the U.S. Labor Department's closely watched employment report on Thursday 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 U.S. 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."
Market expectations that the Fed will leave rates unchanged at its July meeting are now at 94.8 per cent probability, up from 76.2 per cent 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 per cent to $1.3668.
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