EUR/USD weakens as US Dollar rallies after Trump’s tax bill advances to Senate

EUR/USD drops as US Dollar rallies after Trump’s bill was passed to the Senate

The EUR/USD currency pair declined by 0.35% to around 1.1290 in the North American session on Thursday, retreating from earlier levels near 1.1300. The drop comes amid renewed strength in the US Dollar following the House of Representatives’ approval of US President Donald Trump's sweeping tax-cut and spending bill, which has now been forwarded to the Senate.

The rally in the US Dollar also follows growing concerns over the country’s fiscal outlook. The Congressional Budget Office estimates that Trump’s tax plan could add $3.8 trillion to the national debt over the next decade. Moody’s recently downgraded the US credit rating to Aa1 from Aaa due to concerns over debt sustainability, which may lead to higher borrowing costs for the government.

Adding pressure to the Euro, flash PMI data released earlier on Thursday showed unexpected weakness in the Eurozone’s business activity for May. Both manufacturing and services sectors missed forecasts, indicating further economic softening in the bloc.

Meanwhile, European Central Bank (ECB) policymaker Joachim Nagel maintained an optimistic tone, expressing hope for progress on an EU-US trade agreement.

Investors now await further developments on the tax bill in the US Senate, as well as upcoming macroeconomic indicators, for clearer market direction.