The U.S. dollar edged slightly higher on Wednesday, though it continued to hover near multi-year lows as markets digested dovish comments from Federal Reserve Chair Jerome Powell and the advancement of President Donald Trump’s expansive fiscal plan in Congress.
As of 04:15 ET (08:15 GMT), the U.S. Dollar Index—tracking the greenback against six major currencies—was up 0.1% at 95.512, still close to its weakest level since February 2022.
Dollar Under Pressure as Powell Keeps Door Open
Overnight, the Republican-led Senate narrowly approved Trump’s substantial tax-and-spending package, with Vice President JD Vance casting the decisive vote. The bill, estimated to add $3.3 trillion to the national debt, now heads back to the House for further consideration.
Meanwhile, continued criticism of Powell by Trump has renewed concerns over the Federal Reserve’s independence. At the ECB’s Sintra forum, Powell maintained his data-dependent stance but did not dismiss the possibility of a rate cut in July. According to ING analysts, this leaves the dollar vulnerable to a downside surprise in Friday’s U.S. payrolls report.
Traders are closely watching private employment figures due later today, with economists expecting the ADP National Employment Report to show an increase to 99,000 jobs in June, up from 37,000 in May. Tuesday’s JOLTS data revealed a mixed labor market—job openings rose unexpectedly, but overall hiring slowed.
Euro Supported by Strong Economic Outlook
The euro eased 0.2% to 1.1778, just below its highest level since September 2021. Still, the common currency remains one of the strongest performers this year. European Central Bank President Christine Lagarde attributed the euro’s gains not only to market dynamics but also to underlying economic strength in the eurozone.
While the ECB has delivered eight rate cuts over the past year, policymakers signaled a pause at the next meeting. “The ECB made its hawkish pivot in June and is now in wait-and-see mode,” said ING. Analysts noted that EUR/USD remains largely dollar-driven, with markets showing a clear inclination to buy dips. A softer-than-expected U.S. payrolls print could drive the pair toward 1.20.
Sterling Retreats on Political Concerns
GBP/USD fell 0.3% to 1.3709, retreating from a recent high of 1.3787—the highest level since October 2021. The pound came under pressure following political turmoil in the U.K., where Labour Party leadership was forced to drop a key welfare reform after internal opposition.
ING noted that the withdrawal of the £5 billion benefits cut plan raises questions about fiscal stability and could increase the likelihood of autumn tax hikes, further challenging Prime Minister Starmer’s leadership.
Yen Eyes Trade Developments, Yuan Slips
In Asia, USD/JPY rose 0.3% to 143.83, with market focus turning to ongoing trade talks between Japan and the United States. President Trump described progress as “uncertain,” adding to investor caution.
Meanwhile, USD/CNY edged slightly higher to 7.1672, with the yuan under modest pressure as the greenback steadied near three-year lows.
