Dollar Slides Sharply as US/EU Trade Deal Breakthrough Rewrites Risk
Investor sentiment turned on a dime following the US/EU trade agreement, which capped tariffs at 15% and included major investment pledges. The deal sparked a swift drop in the US dollar—driven by easing trade fears—and shifted focus onto what central banks do next.
USD Falls as Trade Certainty Lifts Risk Appetite
The US dollar is under pressure after the trade pact reduced bracing for tariffs as high as 30%. The dollar index has tumbled toward its lowest level in weeks and is on track for its biggest weekly decline in a month. Markets are now eyeing the implications for the Federal Reserve, with attention turning to this week’s inflation reports and labor data. Consensus has shifted away from early rate cuts, leaving USD sentiment highly vulnerable to next week’s releases.
EUR Stabilises, but Export Concerns Resurface
The euro strengthened initially as markets welcomed the trade certainty. However, it has since paused as voices in Europe, particularly in Germany and France, expressed concern that the deal heavily favours US interests and could damage EU export competitiveness. Eurozone data this week, especially factory orders and industrial production, will be critical in determining whether the euro can hold its gains or slide under economic pressure.
GBP Hovers Near Multi‑Week Lows Amid Risk-On Sentiment
Sterling fell toward a ten‑week low against the dollar as the market risk tone shifted. While GBP/EUR briefly rallied after the trade deal, the strength was fleeting. With UK economic data sparse and fiscal uncertainty lingering, sterling remains vulnerable unless risk appetite stays firm. Focus this week will be on any UK macro surprise or policy-statement that could change sentiment.
As trade tension fades and risk sentiment improves, the dollar’s weakness is front and center. But the rebound isn’t assured. With key US inflation readings, global central bank commentary, and eurozone economic data all on the agenda, whichever way the macro winds shift next could quickly reverse currency trends.
Market Report by Sam Balla-Muir