US Dollar Index Slips Toward 99.50 as Trump’s Budget Clears House

US Dollar Index Drops Towards 99.50 as Trump's "One Big Beautiful Act" Crosses First Hurdle

The US Dollar Index (DXY) continued to retreat on Friday, sliding toward the 99.50 level amid growing investor concerns over the US fiscal outlook. This comes as the House of Representatives narrowly passed President Donald Trump's controversial budget proposal—dubbed the “One Big Beautiful Bill”—which is now headed to the Senate.

Fiscal Fears Erode Dollar Strength

At the time of writing, the DXY— which measures the Greenback against a basket of six major currencies—was trading around 99.60, down from recent highs. This marks the lowest level in nearly two weeks, with selling pressure driven largely by increased fiscal deficit worries.

According to the Congressional Budget Office (CBO), Trump’s bill is projected to widen the federal deficit by $3.8 billion, primarily through tax incentives such as exemptions on tipped wages and US-made car loans. The bill passed the House by a razor-thin margin of 215-214, underscoring its divisive nature.

Investors are reacting cautiously, shifting away from the US Dollar as the long-term implications of expanded deficit spending begin to take shape.

Bond Yields Reflect Caution

Further contributing to the Dollar’s slide, the 30-year US Treasury bond yield pulled back to 5.05% after briefly touching 5.15% on Thursday—its highest level since November 2023. The reversal in yields highlights market uncertainty and growing demand for long-duration government debt as a defensive hedge.

PMI Data Offers Temporary Support

Despite the fiscal jitters, the Greenback found some temporary relief following the release of stronger-than-expected S&P Global PMI data. The Composite PMI rose to 52.1 in May from 50.6 in April, signaling continued expansion in business activity. Both Manufacturing and Services PMIs improved to 52.3, beating consensus estimates and indicating resilience in the US economy.

However, the positive PMI momentum was not enough to offset broader concerns around fiscal discipline and debt sustainability.