The dollar index (DXY00) on Wednesday fell by -0.03%. The dollar gave up an early advance Wednesday and turned lower on concern that the US labor market is weakening after the June ADP employment change declined for the first time in more than two years. Also, Wednesday’s rally in the S&P 500 to a new record high curbed liquidity demand for the dollar. Rising deficits are also bearish for the dollar as the Congressional Budget Office estimates the Republicans’ reconciliation bill making its way through Congress would add nearly $3.3 trillion to US budget deficits over the next ten years.
The dollar initially moved higher Wednesday due to increased trade tensions with Japan, as the yen has retreated after President Trump stated that a trade deal with Japan is unlikely. The dollar added to its gains when GBP/USD tumbled to a 1-week low on political turmoil in the UK after UK Prime Minister Starmer failed to fully back Chancellor of the Exchequer Reeves, bolstering speculation that Reeves may soon step down.
