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The U.S. dollar extended losses on Friday, putting it on track for its worst weekly performance since early February, as concerns over Washington’s mounting fiscal risks deepened following the House’s approval of President Donald Trump’s sweeping tax and spending bill.
At 05:00 ET (09:00 GMT), the Dollar Index — which tracks the greenback against a basket of six major currencies — fell 0.6% to 99.295, on course for a 1.6% weekly decline, snapping a four-week winning streak.
Dollar Slumps on Debt Worries
Investors continued to react to Moody’s recent downgrade of the U.S. sovereign rating, which cited the country’s ballooning debt load and worsening fiscal trajectory. The concerns were magnified after the House of Representatives passed Trump’s tax bill on Thursday by a razor-thin margin, sending it to the Senate where passage still appears likely.
The legislation, if signed into law, is projected by the Congressional Budget Office to add $3.8 trillion to the national debt over the next decade, further exacerbating investor fears about long-term fiscal sustainability.
Yields on long-term U.S. Treasuries surged, with the 30-year bond reaching 5.161%, its highest since October 2023, and the 10-year yield pushing above 4.6%, reflecting expectations of greater government borrowing and inflation pressure.
Euro Jumps on German Growth Surprise
The euro advanced strongly on Friday, with EUR/USD up 0.5% to 1.1338, after revised data showed Germany’s economy grew 0.4% in the first quarter of 2025, double the earlier estimate.
The stronger-than-expected rebound in Europe’s largest economy — driven by robust export and manufacturing activity — offered a much-needed boost to the euro amid lingering concerns about the broader eurozone’s economic outlook.
Analysts noted that the growth spurt may be short-lived due to the frontloading of trade activity ahead of U.S. tariffs, but the data nonetheless helped lift sentiment.
Sterling Rises as Retail Sales Surge
The British pound also posted gains, with GBP/USD rising 0.5% to 1.3490, after U.K. retail sales jumped 1.2% in April, defying expectations and marking a fourth straight monthly increase — the longest such streak since the post-lockdown rebound in 2020.
The strength in consumer spending could pressure the Bank of England to take a more cautious approach to future rate cuts, especially as services inflation also remains elevated.
Yen Rallies Ahead of Japanese GDP Data
In Asia, the Japanese yen strengthened further, with USD/JPY down 0.5% to 143.32, supported by accelerating inflation data and investor appetite for safe havens amid global fiscal volatility.
Japan’s core CPI rose 3.5% year-on-year in April, above the consensus of 3.4% and marking the fastest increase in over two years. A more closely watched core-core measure (excluding food and energy) also ticked higher, reinforcing expectations that the Bank of Japan may adopt a less dovish tone going forward.
Yuan Steady, Market Awaits U.S.-China Updates
The Chinese yuan was little changed, with USD/CNY edging 0.2% lower to 7.1887, in subdued trading as markets awaited further developments in U.S.-China trade dialogue and the potential economic impact of Trump’s new tariffs.
