US Dollar Weakens for Third Consecutive Day Amid US Fiscal Concerns and Geopolitical Tensions

US Dollar Weakens for Third Consecutive Day Amid Geopolitical Tensions and Domestic Fiscal Challenges

The US Dollar Index (DXY) continued its decline for a third straight day on Wednesday, as geopolitical risks and domestic fiscal struggles weighed on the US Dollar. Concerns over rising tensions in the Middle East, particularly Israel's alleged plans to attack Iranian nuclear sites, have raised doubts about President Trump's ability to control these developments. Meanwhile, Trump's ongoing difficulties in securing support for his proposed tax bill have further dampened investor confidence in the USD.

Geopolitical Concerns and Domestic Struggles

The USD faced pressure following reports that Israel is considering military action against Iran’s nuclear facilities. This move could exacerbate already heightened geopolitical risks, particularly in the Middle East. While former President Biden had previously averted such a conflict, Trump’s perceived inability to manage this crisis has left markets uncertain about his diplomatic leverage in the region.

Domestically, the situation is no better for the US Dollar. Trump has encountered significant resistance in Congress regarding his tax proposal, known as the “Big Beautiful Bill.” His administration has struggled to push the bill through, with disagreements over issues like the state and local tax (SALT) deduction and social safety-net cuts. Despite Trump’s urging, lawmakers from high-tax states and conservative factions continue to oppose the bill unless their concerns are addressed. This standoff has only added to the growing uncertainty surrounding the USD.

As the US Dollar Index dropped below the 100.00 level, investors are increasingly concerned about the direction of the US economy, with the combination of foreign policy challenges and domestic fiscal gridlock contributing to a weakened outlook for the Greenback.