The Dollar slipped to its lowest level against the Euro since September 2021 on Tuesday, weighed down by fiscal concerns sparked by President Donald Trump's spending bill and ongoing uncertainty over trade agreements.

Investors also began betting on a faster pace of monetary easing by the Federal Reserve this year, ahead of a series of key US economic data releases this week, including Thursday’s nonfarm payrolls report.

This prompted increased selling of the Dollar, pushing the Euro to a near four-year peak of $1.1808. According to LSEG data, the single currency surged 13.8% in the first half of the year, marking its best-ever performance for that period, Reuters reports.

Meanwhile, the British Pound held steady at $1.3739, close to the three-and-a-half-year high reached last week. The Japanese Yen strengthened to 143.77 per Dollar, gaining 9% in the first six months, the strongest showing since 2016.

The Dollar index, which tracks the greenback against six other major currencies, fell to 96.612, marking its lowest level since February 2022.                                                                                                                                                                            

“There are many reasons not to like the USD. Some are structural, like the erratic trade policies and fiscal risks,” stated Moh Siong Sim, a Bank of Singapore currency strategist.

“They have earlier caused the USD to weaken despite its relative yield advantage. But the risk of a more dovish Federal Reserve eroding USD's yield advantage is the latest source of USD weakness.”

Investors are facing uncertainty as the US Senate works to pass President Trump’s tax-cut and spending bill, which is causing divisions within the party due to its estimated $3.3 trillion impact on the national debt.

These fiscal worries have weakened market sentiment and led some investors to seek diversification.

The US Dollar, the world’s reserve currency, has fallen over 10%, marking its largest decline in the first half of a year since the free-floating currency system started in the early 1970s.

“In 2025, the US exceptionalism narrative has been called into question. Treasury auction demand has been under pressure in recent months, and foreign investor appetite has reduced,” according to Nathan Hamilton, investment analyst for fixed income at Aberdeen Investments.

Meanwhile, Trump has kept pressuring the Federal Reserve to loosen monetary policy, sending Fed Chair Jerome Powell a list of global central bank interest rates with handwritten notes suggesting that the US rate should fall somewhere between Japan’s 0.5% and Denmark’s 1.75%.

Trump’s ongoing criticism of the Fed and Chair Powell has heightened investor concerns about the central bank’s independence and credibility. While Trump cannot remove Powell over disagreements about policy, he publicly called on him to resign last week.

Investors are closely watching for comments from Powell, who will join other central bank leaders at the European Central Bank forum in Portugal on Tuesday. Traders are currently anticipating a total of 67 basis points of monetary easing from the Fed this year.