Dollar Holds Gains After Trump Tax Bill Clears, Markets Eye Tariff Deadline

The U.S. dollar steadied near recent highs on Friday after President Donald Trump’s sweeping tax and spending bill passed its final hurdle, fueling concerns about fiscal sustainability but boosting short-term market sentiment. The Republican-led House approved the $3.4 trillion package—nicknamed “One, Big, Beautiful Bill”—which will be signed into law Friday, raising the U.S. national debt to $36.2 trillion.

The greenback rebounded from earlier losses driven by stronger-than-expected U.S. jobs data. Nonfarm payrolls rose by 147,000 in June, exceeding forecasts and reducing expectations for a near-term Federal Reserve rate cut. Markets now price a 94.8% chance the Fed will hold rates steady in July, up from 76.2% earlier this week, according to CME FedWatch.

Analysts say that while the fiscal outlook is worrying, investors are currently focused on resilient labor data and optimism around potential trade deals. Trump is pressuring nations like Japan to secure bilateral agreements ahead of the July 9 tariff deadline, with the U.S. set to send official rate letters to trade partners. The European Union aims to reach a trade agreement “in principle” before that date.

Despite the dollar’s Thursday rally, it has posted its worst first half since 1973, weighed down by tariff fears and uncertainty surrounding U.S. economic policy. The dollar index hovered at 97.056. The euro edged up to $1.1765, and the yen strengthened slightly to 144.69 per dollar, trimming gains from the previous session. Sterling remained flat at $1.36495.

Currency strategist Hirofumi Suzuki noted that although the U.S. labor market is slowing, its gradual pace is reassuring. He predicted continued dollar softness and yen strength if trade talks disappoint.