US Dollar Stages Comeback as Strong ISM and JOLTS Data Counter Political and Trade Uncertainties

The US Dollar Index (DXY) staged a recovery after hitting its lowest level since February 2022 at 96.38, climbing to around 96.85 during the American session, buoyed by stronger-than-expected US economic data. The ISM Manufacturing PMI and JOLTS Job Openings reports exceeded forecasts, easing some of the bearish pressure that has plagued the Greenback. Despite this rebound, market sentiment remains cautious due to uncertainties surrounding the US administration’s trade and fiscal policies, compounded by escalating political pressure on the Federal Reserve. As investors await Federal Reserve Chair Jerome Powell’s remarks at the ECB Forum in Sintra, Portugal, the Dollar’s near-term trajectory hinges on incoming data and policy signals.

The US Dollar recorded its worst first-half performance since the floating currency era began in 1973, with the DXY declining over 10% in H1 2025, including its steepest quarterly drop since Q4 2022. This downturn is largely attributed to the unpredictable economic and trade policies of President Donald Trump. His sweeping legislative proposal, dubbed the “One Big Beautiful Bill,” featuring permanent tax cuts and major spending reforms, has raised alarms about fiscal stability, with estimates suggesting it could add over $3.3 trillion to the national debt. Additionally, looming trade tensions, with a July 9 deadline for new tariffs and limited progress in negotiations—save for a tentative agreement with the UK and de-escalation with China—have further eroded confidence in the Dollar against major G10 currencies.

Economic data provided some relief, with the ISM Manufacturing PMI rising to 49.0 in June from 48.5 in May, surpassing expectations of 48.8 and signaling a slower contraction in manufacturing activity. Concurrently, JOLTS Job Openings surged by 374,000 to 7.769 million in May, the highest since November 2024 and well above the consensus of 7.3 million, underscoring persistent strength in the US labor market. However, political pressures continue to weigh heavily, as President Trump broadened his criticism to the entire Federal Reserve Board, calling for aggressive rate cuts to “1% or better.” Treasury Secretary Scott Bessent’s remarks downplaying tariff-related inflation risks further fueled expectations of a September rate cut. As the “One Big Beautiful Bill” faces intense scrutiny in a Senate “vote-a-rama” session, fiscal and political uncertainties keep the Dollar under pressure, with markets eyeing the upcoming Nonfarm Payrolls report for further direction.