The dollar index (DXY00) today is up by +0.14% at a 1-week high. The weakness in stocks today has boosted some liquidity demand for the dollar. Also, comments from President Trump that he will start announcing unilateral tariff rates in the coming days on dozens of countries are lifting the dollar, as concerns rise that rising tariffs will boost inflation and prevent the Fed from cutting interest rates.
Gains in the dollar are limited after President Trump signed the reconciliation bill into law last Friday. The nonpartisan Congressional Budget Office estimates that the bill will add $3.4 trillion to US budget deficits over the next decade. The fiscal stimulus from the bill will be a net positive for the US economy, but the higher deficit is negative for the dollar as it increases the risk of an eventual debt crisis in the United States and reduces foreign investor confidence in the United States.
