Dollar rebounds after US-EU deal, Fed awaited

The US dollar index rose to 98 on Monday, marking its highest level in nearly a week, supported by easing trade tensions following the newly announced US-EU trade agreement.

The deal, which imposes a 15% tariff on EU exports to the US—down from the initially threatened 30% rate by President Trump—has helped alleviate some of the market’s previous concerns about escalating trade conflicts. This moderation in tariff rates has improved investor sentiment and bolstered the dollar’s appeal as a safe-haven currency.

Meanwhile, US and Chinese officials are scheduled to meet today to discuss ongoing trade issues, with broad expectations of an extension to the current trade truce, which is set to expire on August 12. The possibility of prolonging this temporary ceasefire has contributed to a more optimistic market mood, reducing volatility and supporting the greenback.

Market focus is increasingly turning to the Federal Reserve’s upcoming monetary policy decision later this week, where no changes to the federal funds rate are anticipated amid relatively stable economic conditions. Investors will closely watch for any hints regarding the Fed’s outlook on inflation and growth, as well as potential shifts in policy stance amid the evolving global trade landscape.

In addition, a series of key economic indicators are scheduled for release over the coming days, which will provide further insight into the health of the US economy. These include GDP growth figures, nonfarm payrolls, the Personal Consumption Expenditures (PCE) inflation report, and the ISM Manufacturing PMI. Collectively, these data points will help clarify how the economy is weathering the impact of tariffs and whether the recent easing in trade tensions is translating into tangible economic benefits.

With concerns over the economic impact of tariffs appearing to subside for the moment, market participants remain cautiously optimistic but vigilant, ready to adjust positions based on the upcoming economic releases and any new developments in trade negotiations.

Chiedi a ChatGPT