US-EU trade deal boosts dollar against major peers

The dollar gained against major currencies, including the euro and yen, on Monday (July 29, 2025), with sentiment lifted by a trade agreement between the U.S. and the EU, which brings market certainty and averts a global trade war.

U.S. President Donald Trump and European Commission President Donald Trump reached a framework trade agreement, which provides for an import tariff of 15% on EU goods, half the rate Trump had threatened from August 1.

That follows last week’s U.S. agreement with Japan, while top U.S. and Chinese economic officials will resume talks in Stockholm on Monday, aiming to extend a truce by three months and keep sharply higher tariffs at bay. The dollar rose against the safe-haven Swiss franc, up 0.82% at 0.80155 francs. It rose against the Japanese yen , up 0.29% at 148.12.

The euro was last down 0.81% at $1.164275, set for its biggest daily loss since mid-May, reversing an initial knee-jerk rise in Asia trade as investors’ focus shifted to what an easing in global trade tensions meant for the dollar overall.

“While the USD’s strength today may reflect the perception that the new US-EU deal is lopsided in favor of the US, the USD’s strength may also reflect a feeling that the US is reengaging with the EU and with its major allies,” Thierry Wizman, global FX & rates strategist at Macquarie Group, said in an investor note.

“Rather than the ‘divorce’ between the U.S. and its partners that was seemingly foretold in February-June, the US and its key partners are instead in ‘marriage counselling’, and thus still ‘talking about their feelings.’” The dollar tumbled sharply earlier this year, particularly against the euro, as fears that dramatically higher tariffs on trade with most of its major partners would hurt the U.S. economy caused investors to consider shifting out of U.S. assets.

Normally, the gap between yields on government bonds is a major factor for currency moves, but at present the euro is significantly higher than the gap between U.S. and eurozone yields would imply.

“If you think about what we expected in the beginning of the year, no one really thought that the euro is going to be so strong. We all thought that, especially post Liberation Day, that the dollar will remain strong,” said Anthi Tsouvali, multi-asset strategist at UBS Wealth. “We continue to see the dollar weakening; it has consolidated recently a little bit but we think that in the long term it will get weaker.”

The euro fell against the yen and sterling, having hit a one-year high on the Japanese currency and a two-year high on the pound at the start of trade.

The dollar strengthens against the pound, which was 0.24% lower at $1.3422.

As concerns subside about the economic fallout from punishing tariffs, investor attention is shifting to corporate earnings and central bank meetings in the United States and Japan in the next few days.

Both the Fed and the Bank of Japan are expected to hold rates steady at policy meetings this week, but traders will watch subsequent comments to gauge the timing of the next moves.

Investors will also be watching to see Mr. Trump’s reaction to the Fed’s decision. The U.S. president has been putting the Fed under heavy pressure to make significant rate cuts, and Mr. Trump appeared close to trying to fire Powell last week, but backed off with a nod to the market disruption that would likely follow.

In addition, quarterly results are due in the coming days from Apple, Microsoft, Amazon and Facebook parent Meta Platform, four of the “Magnificent Seven” whose stocks heavily influence benchmark indexes.

They matter for currency investors if strong results cause an acceleration of flows back into U.S. assets.