USD faces pressure as US deficit spending surges beyond G7 peers

USD index shows vulnerability as new data highlights the US government's aggressive deficit spending compared to other major economies. According to BCA analysis, the Trump-Biden era has been characterized by unprecedented fiscal expansion, with US spending significantly outpacing G7 counterparts. This fiscal profligacy has supported equity markets but raises long-term concerns about dollar sustainability. The mounting deficits, which require eventual repayment with interest, could weaken USD against major pairs as investors reassess sovereign risk premiums. Market participants are increasingly factoring in the fiscal trajectory when pricing USD pairs, particularly EURUSD and USDJPY. The spending gap between the US and other developed nations may pressure Treasury yields higher, creating a complex dynamic for USD strength. Near-term, this fiscal overhang could limit USD upside despite any positive economic data, with traders watching debt ceiling debates and fiscal policy announcements for directional cues.