US Dollar Nears Four-Year Low Amid Rate Cut Optimism, Trade Fears, Deficit Concerns

The U.S. dollar has weakened significantly, reaching near four-year lows against major currencies like the euro and Swiss franc due to growing expectations of multiple Federal Reserve rate cuts in 2025 and concerns over the expanding U.S. fiscal deficit. President Donald Trump's proposed $3.3 trillion tax-cut and spending bill has heightened worries about the nation's debt, contributing to the dollar's decline amid stalled trade negotiations and tariff uncertainties, with a critical July 9 deadline approaching. Market optimism has increased around potential easing of the Fed's monetary policy, supported by cooling inflation data and softening economic indicators, prompting forecasts for several rate reductions this year. Additionally, recent progress in trade talks, including agreements with China and Canada, alongside hopes for a U.S.-EU trade deal, have further pressured the dollar while boosting risk and safe-haven currencies. President Trump has publicly called for lower interest rates and signaled possible changes in Fed leadership, raising concerns about the central bank's independence and fueling further dollar weakness. Meanwhile, the euro has climbed to multi-year highs but faces potential volatility depending on upcoming inflation data and European Central Bank policy expectations.