USD weakens on Trump's $1.8B military stimulus announcement

The US dollar index declined 0.2% following President Trump's announcement of a $1,776 payment to over one million active-duty service members before Christmas. This unexpected fiscal stimulus, totaling approximately $1.8 billion, adds to inflationary pressures already concerning Fed policymakers. The move comes amid heightened market sensitivity to government spending, with traders viewing additional stimulus as potentially delaying Fed rate cuts. EUR/USD gained 25 pips to 1.0475, while USD/JPY retreated to 152.80. The stimulus announcement reinforces market expectations of persistent inflation, supporting the Fed's cautious stance on monetary easing. Technical indicators show USD index testing support at 106.50, with further weakness possible if fiscal expansion concerns intensify. Traders are monitoring additional stimulus measures that could further weaken dollar sentiment heading into year-end.