The euro strengthened on Monday during a U.S. market holiday, buoyed by President Trump’s decision to postpone tariffs on European goods. Meanwhile, the yen found support following remarks by the Bank of Japan governor, which hinted at the possibility of further interest rate increases later this year.
Investor attention is now fixed on the U.S. Senate, where lawmakers are set to debate Trump’s tax cut proposal. The bill has sparked apprehension, especially after Moody’s downgraded the U.S. sovereign credit rating on May 16. Analysts note that the bill, as passed by the House of Representatives, could add approximately $3.8 trillion to the federal debt—currently estimated at $36.2 trillion—over the next ten years, according to the Congressional Budget Office.
Trump acknowledged over the weekend that the bill will likely undergo “significant” revisions during Senate deliberations.
Investor sentiment has been further dampened by the administration’s unpredictable tariff strategies. The latest retreat from imposing a 50% tariff on EU imports, previously set to take effect June 1, helped push the euro to a one-month high.
European Central Bank President Christine Lagarde noted that the euro could emerge as a credible alternative to the dollar, provided EU member states bolster the region’s financial and security infrastructure.
Globally, bond yields—particularly on longer-term securities—have climbed as markets react to rising fiscal deficits in developed economies, especially in the U.S. and Japan. Japanese Finance Minister Katsunobu Kato also expressed vigilance toward developments in the debt markets.
On monetary policy, BOJ Governor Kazuo Ueda emphasized the need to stay alert to inflationary pressures, signaling that Japan may continue tightening its policy stance.
As a result, the greenback slipped 0.3% against the yen to 142.39, while the dollar index fell 0.1%, marking its third consecutive day of declines.
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