The U.S. dollar continued to climb in early trading Tuesday, while the euro lost further ground after a major trade agreement between the United States and the European Union. Investors are also keeping a close eye on the Federal Reserve’s policy meeting, which begins later in the day.
As of 04:10 ET (08:10 GMT), the U.S. Dollar Index—which gauges the greenback against a basket of six major currencies—rose 0.2% to 98.607, extending the previous session’s upward move.
Dollar Finds Support from Transatlantic Deal
The greenback regained momentum following the announcement of a new trade framework between Washington and Brussels. Under the terms of the deal, a 15% import tariff will be applied to European goods entering the U.S.
In addition, the European Union has committed to invest approximately $600 billion in the United States and to significantly increase its purchases of American energy and defense-related products.
Meanwhile, attention is also turning to upcoming talks between the U.S. and China in Sweden. Media speculation suggests both countries might agree to prolong their current trade truce, which could ease global economic uncertainty.
With geopolitical tensions calming, focus has shifted to a wave of key economic data expected this week, starting with the Fed’s two-day policy meeting.
Among Tuesday’s top releases is the JOLTS report—a widely followed indicator of job vacancies and labor market trends. This will be closely watched ahead of Friday’s July nonfarm payrolls report, a key barometer for the U.S. economy.
Also on the docket is consumer confidence data from the Conference Board. Economists anticipate an uptick in sentiment compared to June.
“Ahead of tomorrow’s FOMC meeting, which could also prove dollar positive, today sees the release of US JOLTS job opening data and also July consumer confidence. The former is expected to show some stability (at around the 7500k mark) and the latter is expected to pick up in line with the strong stock market,” said analysts at ING, in a note.
Euro Slips Further Amid Unease Over Trade Terms
The euro continued its slide, with EUR/USD dropping 0.3% to 1.1559, deepening losses after a 1.3% plunge on Monday—its sharpest one-day decline in more than two months.
Concerns are rising across Europe that the bloc may have gotten the short end of the deal with Washington. French Prime Minister Francois Bayrou labeled it “a dark day,” while German Chancellor Friedrich Merz warned the agreement could bring “significant” economic harm to Germany.
“We have been arguing for some time that EUR/USD could come under pressure this quarter, and arguably, EUR/USD is now in a more fragile position than we had been expecting ahead of a big week for event risk,” said ING.
“EUR/USD price action remains very poor. And if it can’t rally above 1.1600/1625 on any good news today, it could well take out support – both at 1.1555 and 1.1500.”
The British pound also declined, with GBP/USD sliding 0.2% to 1.3335, touching its lowest level in two months.
“There is a technical case now for GBP/USD to trade down to the 1.3150 area. That is our preference in a week where we think the event risks are skewed to the positive for the dollar,” ING added.
Yen Steady Ahead of Bank of Japan Decision
In Asia, the Japanese yen saw limited movement, with USD/JPY edging down 0.1% to 148.41 after modest gains the day before.
The Bank of Japan is widely expected to keep interest rates unchanged when it meets on Thursday, amid a backdrop of stable trade conditions and lingering political uncertainty at home. Some analysts, however, believe last week’s U.S.-Japan trade agreement might give Japanese policymakers room to consider a rate hike later this year.
Investor sentiment remains subdued in Japan following a major electoral setback for the ruling coalition in last week’s upper house vote, which has fueled rumors of a possible resignation by Prime Minister Shigeru Ishiba.
Elsewhere, AUD/USD declined 0.3% to 0.6503, adding to Monday’s 0.7% drop, while the Chinese yuan remained flat, with USD/CNY holding steady at 7.1777.
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