TOKYO -- The U.S. dollar hovered close to a five-month low against its major peers on Monday, pressured by President Donald Trump's erratic trade policies and a run of soft macroeconomic data.

The euro stood not far from a five-month peak after German parties on Friday agreed on a fiscal deal that could boost defence spending and revive growth in Europe's largest economy.

There have been "two stark shifts in macro markets" over the past month, according to Goldman Sachs analysts Dominic Wilson and Kamakshya Trivedi.

The first is a "sharp re-rating lower" of U.S. assets "on the back of tariff volatility and the environment of broader policy uncertainty created by the new administration", while the second is a "sharp re-rating higher in the fiscal impulse in Germany", the analysts wrote in a note to clients.

"Together, these two shifts pose a significant challenge to the narrative of U.S. exceptionalism that has been a dominant market theme," they said.

The euro was fetching $1.0879, slightly off the $1.0947 level it hit last Tuesday for the first time since October 11.

German Chancellor-in-waiting Friedrich Merz announced on Friday that he had secured the crucial backing of the Greens for a massive increase in state borrowing.

The deal will likely be approved by the outgoing parliament this week. It includes a 500 billion euro ($544 billion) fund for infrastructure and sweeping changes to borrowing rules.

Meanwhile, the Chinese yuan edged back towards the strongest level in four months in offshore trading, changing hands at 7.2400 per dollar . Last Wednesday, it strengthened to 7.2158 per dollar for the first time since November 13.

On Sunday, China's State Council unveiled a "special action plan" to boost domestic consumption, featuring measures including increasing residents' income and establishing a childcare subsidy scheme.

During the session, a string of China data showed the economy started the year on a firmer footing with retail sales picking up speed in the first two months.

The U.S. dollar index, which measures the currency against the six major counterparts, was little changed at 103.71 early in the Asian morning, less than 0.5% away from a five-month trough of 103.21 reached last Tuesday.

The index is currently down almost 6% from the more than two-year peak of 110.17 touched in mid-January, as optimism that Trump's presidency would spur growth turned into worries that his trade policies could trigger recession.

Data on Friday showed U.S. consumer sentiment plunged to a nearly 2-1/2-year low in March and inflation expectations soared amid worries about the effect of Trump's sweeping tariffs, which have ignited a global trade war.

U.S. retail sales figures due later in the day "will be a big test for the USD given the slump in consumer confidence surveys", HSBC strategists wrote in a report.

"Although we believe the USD can recover lost ground in the months ahead, it is not going to be an easy path."

The dollar was little changed at 148.70 yen, not straying far from last Tuesday's trough at 146.545, the weakest level since October 4.

The Federal Reserve is widely expected to leave policy unchanged on Wednesday.

Also on Wednesday, the Bank of Japan is tipped to keep interest rates steady, but the conditions for another rate hike have been falling into place, with big Japanese firms offering bumper pay hikes in wage talks with unions for a third straight year.

Speaking in parliament last week, BOJ Governor Kazuo Ueda said he expects wage rises to spur a pick-up in consumption, although he was "very worried" about uncertainties surrounding overseas economic developments.

The dollar added 0.13% to 148.83 yen .

Sterling was steady at $1.2927, with the Bank of England also seen keeping policy unchanged on Thursday.

Bitcoin was little changed at around $83,000.

($1 = 0.9191 euros)