empty
27.05.2025 09:53 AM
Markets Anxiously Await U.S. Senate Debate on Increased Government Spending (Possible Limited Decline in GBP/USD and Gold Prices)

The U.S. dollar remains under pressure. What's next, and what are its prospects?

The trade war initiated by Donald Trump has significantly damaged the reputation of the U.S. dollar, which has already been in poor shape for some time. The aggressive changes to the foundations of the national economy and the use of the dollar as a financial weapon against Russia have led to a collapse in trust. This was demonstrated during the most recent 20-year Treasury bond auction, in which the U.S. Treasury had to essentially buy itself. The market took note and responded with decreased demand for dollar-denominated assets.

Of course, the U.S. economy needs a weaker dollar to make domestically produced goods more competitive on global markets. But Trump does not want the dollar's decline in prestige and demand. Meanwhile, his sharp geopolitical maneuvers and tariff wars risk pushing the U.S. into recession—something that might be confirmed by this week's revised Q1 GDP data, which is expected to show negative growth for the first time since autumn 2022.

Another threat looming over the dollar is the anticipated sharp rise in U.S. national debt. The Senate is soon expected to debate a massive tax and budget package previously proposed by Trump, which would significantly increase the federal deficit. Forecasts suggest the bill could add approximately $3.8 trillion to the current national debt of $36.2 trillion over the next decade.

Ironically, the 47th president—once a vocal opponent of government overspending—is now effectively reverting to the same financial model that brought the U.S. to the brink of crisis and could trigger a full-scale financial meltdown.

In this environment, the dollar is clearly set to face challenges, and the Treasury's bond sales will likely become less appealing to foreign buyers who once eagerly absorbed them. As a result, the U.S. Dollar Index (DXY) could potentially fall to levels last seen in 2021, around 90 points.

Dollar-denominated assets are also expected to lose appeal among global investors. Moreover, there are serious doubts that the U.S. government's effort to reindustrialize the economy—shifting it away from a post-industrial model—can succeed, especially in the short term. This means interest in the dollar may steadily decline over time.

Will other currencies such as the euro or the pound benefit relative to the dollar?

That seems unlikely. Europe is experiencing a profound crisis—both civilizational and economic. Yes, in the short term, militarization and increased defense spending could support the euro, particularly in its pair with the dollar. But meaningful growth is unlikely. Most likely, any rise will be local and limited: around 1.1500 for EUR/USD and around 1.3700 for GBP/USD. After that, a new wave of decline is expected once it becomes clear that money alone will not magically turn into tanks and aircraft. Without a robust defense industrial base, the eurozone cannot rapidly scale production—meaning we should not expect a repeat of the so-called "German economic miracle" of the WWII era.

What to Expect in the Markets Today

The dollar may see a local rebound against major currencies in the short term, followed by a renewed decline. Gold also has downside potential in the context of its short-term bearish trend. Cryptocurrencies will likely remain in a sideways consolidation, constrained by localized dollar strength.

This image is no longer relevant

This image is no longer relevant

Daily Forecast

GBP/USD

The pair is trading above the 1.3545 level. A technical drop below this level could trigger a correction toward 1.3440. The sell trigger could be a break below 1.3538.

GOLD

Gold remains in a short-term downtrend, trading below 3322.00. In the context of waning trade tensions between the U.S. and its major partners, prices could decline to 3205.75. The sell trigger may be a move below 3301.19.

Pati Gani,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

Is This the Right Time for Christine Lagarde to Leave Her Post?

While the euro shows no intention of yielding to the U.S. dollar, Christine Lagarde is about to face criticism over her intention to continue leading the European Central Bank

Jakub Novak 13:35 2025-06-04 UTC+2

USD/CAD. Analysis and Forecast

The USD/CAD pair remains in a sideways consolidation near its lowest levels since October 2024. Market participants are awaiting the Bank of Canada's interest rate decision, which will be announced

Irina Yanina 09:57 2025-06-04 UTC+2

The Stock Market Believes Trump's Tariff Game Won't Have a Major Impact (Growth in #NDX and #SPX CFDs May Continue)

After a sharp, almost catastrophic drop in March and April, the major U.S. stock indices recovered in May, fully offsetting the decline. Confidence is growing among market participants that this

Pati Gani 09:53 2025-06-04 UTC+2

The Market Is Playing a Dangerous Game

Is the market only hearing what it wants to hear? Or is it simply playing the "buy the dip" game? According to Nomura, buying the S&P 500 five days after

Marek Petkovich 09:27 2025-06-04 UTC+2

What to Pay Attention to on June 4? A Breakdown of Fundamental Events for Beginners

There are not many macroeconomic reports scheduled for Wednesday. Of course, we should note the services sector business activity indices for Germany, the UK, the EU, and the US. However

Paolo Greco 07:27 2025-06-04 UTC+2

GBP/USD Overview – June 4: Trump Is Only Interested in the Big Fish

The GBP/USD currency pair traded lower on Tuesday, but the decline was weak, just like the volatility. Just look at the most recent stretch of the GBP/USD movement

Paolo Greco 03:41 2025-06-04 UTC+2

EUR/USD Overview – June 4: Words, Words... Where Are the Actions?

The EUR/USD currency pair traded relatively calmly throughout Tuesday, and the U.S. dollar even managed to gain slightly. However, we wouldn't pay much attention to a dollar rise

Paolo Greco 03:41 2025-06-04 UTC+2

The U.S. Economy Will Suffer More Than Others from Tariffs

Donald Trump is jeopardizing his own economy. This was the conclusion reached by the G-20 countries at their recent summit. According to summit participants, the discussions focused on the trade

Chin Zhao 00:28 2025-06-04 UTC+2

EUR/USD. Failed Assault on the 1.14 Level: Bears Retreat but Do Not Surrender

Buyers of EUR/USD started the trading week vigorously, testing the resistance level at 1.1450 (the upper line of the Bollinger Bands indicator on the daily chart) and updating a six-week

Irina Manzenko 00:27 2025-06-04 UTC+2

Euro: Trouble Has Arrived – Open the Gates!

Trouble came from where it was least expected. Frustrated by its coalition partners' refusal to support its immigration control plans, the Freedom Party dismantled the Dutch government. The country will

Marek Petkovich 00:27 2025-06-04 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.