Dollar Dips to Multi-Year Lows Amid Global Economic Tug-of-War

The dollar declined to multi-year lows against the euro and sterling due to expectations of Federal Reserve interest rate cuts and focus on U.S. fiscal policies. The greenback fell sharply after an Israel-Iran ceasefire, with markets eyeing trade negotiations and Congress' tax and spending bill. Interest rates remain a focal point.

The dollar hit multi-year lows against the euro and sterling on Wednesday, influenced by Federal Reserve interest rate cut expectations and renewed focus on U.S. fiscal policies. Despite gaining against the Japanese yen, the greenback plummeted following the Israel-Iran ceasefire agreement earlier in the week.

The U.S. currency's decline comes amid rising interest rate cut anticipations. Federal Reserve Chair Jerome Powell reiterated a cautious stance on rates to Congress, citing potential inflation from President Trump's tariffs. This dovish tone propelled markets to anticipate increased rate cuts by year's end.

Investors are also scrutinizing trade negotiations as a self-imposed deadline looms for avoiding reciprocal tariffs. As Congress also hustles to pass an impending tax and spending bill, market strategies hinge on these developments. Meanwhile, the euro and sterling's gains emphasize global fiscal dynamics' influence on currency markets.

(With inputs from agencies.)