The US dollar is firming against the euro, weakening versus the pound, and demonstrating mixed performance against the yen as market participants focus on global trade dynamics. Over the weekend, President Donald Trump announced the signing of a landmark agreement with Japan, establishing a flat 15.0% tariff on all exports, including automobiles, and mandating $550 billion in Japanese investment into the US economy. According to the White House, this deal is expected to bolster US exports of trucks, agricultural products, and a broad range of goods, supporting job creation nationwide. Analysts emphasize that, for the first time, Washington is moving away from its traditional approach of separating general and sectoral tariffs, adopting a unified 15.0% rate. However, traders remain cautious about the lack of progress in US-EU trade negotiations, especially as the deadline for new US sanctions (August 1) approaches. Meanwhile, a Reuters poll shows most economists believe the Fed’s independence is under pressure from increased political intervention by the Republican administration, yet do not expect an interest rate cut this month.
Eurozone
The euro is losing ground against the yen, pound, and US dollar. Investor concerns are mounting regarding an escalating trade dispute between the EU and US, as both sides appear to be bracing for a negative outcome. On August 1, the US will implement increased tariffs on eurozone goods, while Brussels is preparing to activate the Anti-Coercion Instrument (ACI) to pressure US imports of services and investment. The ECB’s monetary policy meeting this Thursday at 14:15 (GMT+2) is expected to keep rates steady—main refinancing at 2.15%, deposit rate at 2.00%, and marginal lending at 2.40%. Officials are likely to declare that the battle against eurozone inflation is nearly won, but will justify a pause in monetary adjustment due to ongoing trade uncertainties.
United Kingdom
The British pound is strengthening against the euro and the US dollar but showing mixed dynamics with the yen. Sentiment is buoyed by the anticipated signing of a free trade agreement between the UK and India during Prime Minister Narendra Modi’s visit to London on Thursday. The deal will grant zero import duties on 99.0% of Indian exports (including EVs, textiles, and food), while the UK will see tariffs on key exports—mainly alcohol and cars—reduced to 90.0%, and gain access to India’s annual public procurement market worth £38.0 billion. Bilateral trade between the countries reached $55.0 billion in 2023–2024, making the UK the sixth-largest investor in India with $36.0 billion in cumulative investments.
Japan
The yen is gaining versus the euro but displays mixed performance against the pound and US dollar. Investors are scrutinizing the recently signed US-Japan trade deal, which sets import tariffs on Japanese goods, including cars, at 15.0% instead of the previously expected 25.0%, and obligates Tokyo to invest $550 billion in the US economy. Bank of Japan Deputy Governor Shinichi Uchida commented that the agreement reduces economic uncertainty—a key condition for further monetary tightening—and noted that the probability of inflation remaining anchored near the 2.0% target has risen. Most economists now anticipate at least one more 25-basis-point rate hike by the BOJ before year-end.
Australia
The Australian dollar is strengthening against the euro, pound, yen, and US dollar. On Thursday at 01:00 (GMT+2), investors will monitor the release of preliminary July business activity data: manufacturing PMI is forecast to slip from 50.6 to 50.4, services from 51.8 to 51.2, and the composite reading from 51.6 to 51.0. Despite the slowdown, all metrics remain above the growth threshold, lending support to the national currency.
Oil
Crude prices are slipping despite the US-Japan trade agreement, as investor anxiety persists regarding the lack of clarity in US relations with Brussels and Beijing. If retaliatory measures follow new US tariffs from August 1, the resulting strain on the global economy could sharply suppress energy demand. Additional pressure comes from the resumption of full-scale Azeri oil exports via Turkey’s Ceyhan port, following previous disruptions over environmental checks. Meanwhile, the American Petroleum Institute (API) reported a drawdown of 0.577 million barrels in fuel reserves last week. Today at 16:30 (GMT+2), the US Energy Information Administration (EIA) is expected to confirm a further inventory decline of –1.400 million barrels, potentially lending support to oil prices.