FX.co ★ Dollar Set for Sharp Weekly Decline

The dollar index dropped to approximately 99.6 on Friday, positioning it to register a weekly decline exceeding 1%. This decline stemmed from apprehensions regarding the US fiscal outlook. President Trump's newly proposed budget, which encompasses tax reductions alongside increased defense expenditures, has sparked concerns about potentially exacerbating the national debt situation. According to estimates from the Congressional Budget Office, the bill could add nearly $4 trillion to the national debt, heightening fears of prolonged fiscal instability. These worries were further intensified by Moody's recent downgrade of the US credit rating from Aaa to Aa1, attributing the change to growing deficits and escalating costs associated with federal debt servicing. Additionally, the dollar faced downward pressure due to stalled trade negotiation efforts, prompting investors to steer away from US assets. Nonetheless, in a recent development, China's Foreign Ministry announced that Washington and Beijing have agreed to keep communication channels open, following a discussion between Chinese Vice Foreign Minister Ma Zhaoxu and US Deputy Secretary Kurt Campbell.