USDX Gains on EU Deal; Asia Mixed; US Market Records Amid Fed Watch

The euro slumped over 1% on Monday as the US dollar strengthened broadly following the announcement of a new trade agreement between the United States and the European Union. The deal mirrors the framework previously adopted with Japan, featuring lower tariffs and a significant commitment to US energy exports.

Under the agreement, the EU will impose a 15% tariff on select US goods—half the rate initially proposed by Washington—while the US will eliminate tariffs on certain European imports. President Donald Trump also signaled potential tariffs on non-participating countries, suggesting a global rate between 15% and 20%, and reiterated his hope that China would eventually open its market more fully.

However, with the August 1 deadline looming, Washington has yet to finalize agreements with two of its top trading partners: Canada and Mexico.

This week’s attention now turns to the Federal Reserve, which is expected to leave interest rates unchanged at the July 29–30 Federal Open Market Committee (FOMC) meeting. Market participants will closely monitor Fed Chair Jerome Powell’s remarks for signals on when the central bank might resume monetary easing.

Across the Atlantic, the European Central Bank opted to keep rates unchanged last week, maintaining a meeting-by-meeting policy approach amid ongoing divisions within its Governing Council between hawkish and dovish members.

With central bank decisions and high-impact data releases on both sides of the Atlantic, volatility is expected to remain elevated in the EUR/USD pair. While the dollar currently enjoys tailwinds from trade policy momentum and resilient economic signals, upcoming data and Powell’s forward guidance could be decisive in shaping currency trends through the rest of the week.

Gold prices remained on the negative territory on Tuesday, lingering near their lowest level in three weeks, as a firmer US dollar and receding fears of a global trade war diminished the metal’s appeal as a safe-haven asset.

The modest recovery in risk sentiment followed renewed trade diplomacy. Top US and Chinese economic officials met in Stockholm for over five hours on Monday, seeking to extend a truce in their longstanding trade conflict. This comes just days after Washington and Brussels reached a framework trade agreement that significantly reduced the scope of potential tariffs.

The US dollar index held near a two-week high, making gold more expensive for investors holding other currencies. Dollar strength, coupled with optimism surrounding trade talks, continues to weigh on demand for non-yielding assets like gold.

Investors are now turning their attention to a flurry of US macroeconomic data due this week, including inflation figures and the July employment report. The Federal Reserve begins its two-day policy meeting later today, with markets widely expecting the central bank to keep rates on hold.

Oil prices climbed sharply on Monday, buoyed by fresh trade optimism and geopolitical pressure, as the United States and European Union struck a new trade agreement and President Donald Trump shortened the deadline for Russia to end its war in Ukraine or face further sanctions.

The rally was driven by renewed optimism following the announcement of a US–EU trade pact on Sunday, which includes a 15% US tariff on most European goods—a notable de-escalation from previous threats.

Adding to the bullish momentum, President Trump announced a significant reduction in the timeline given to Moscow to de-escalate the Ukraine conflict—from 50 days to just 10–12 days—or risk a new wave of sanctions.

On the supply front, an OPEC+ panel convened Monday, reaffirming the importance of full compliance with existing output agreements. The meeting precedes a separate gathering this Sunday, where eight key OPEC+ members are expected to discuss production plans for September.

Analysts forecast that OPEC+—which includes the Organization of the Petroleum Exporting Countries and allies like Russia—will likely complete the return of 2.2 million barrels per day of voluntary output cuts by the end of Q3.

U.S. equities saw a mixed session on Monday as investors assessed the implications of a new U.S.–European Union trade agreement and positioned for a pivotal week filled with central bank decisions and major corporate earnings. The US 500 ended the day almost unchanged, while the US 30 posted minor losses while US Tech 100 ended the session slightly higher.

Over the weekend, the United States and the European Union announced a broad framework trade deal that includes a 15% import tariff on EU goods entering the U.S. While still short on legal documentation, the agreement marked a significant de-escalation in transatlantic trade tensions and includes a substantial commitment from the EU to purchase $750 billion in American energy. The EU also pledged $600 billion in direct investments into the U.S. economy, signaling closer economic alignment between the two allies. With the U.S. importing over $600 billion in goods from the EU last year, the pact covers a significant portion of trade flows and is expected to bolster American manufacturing and energy exports.

Attention is now turning toward the Federal Reserve, which begins its two-day policy meeting on Tuesday. Markets overwhelmingly expect the central bank to keep rates steady at 4.25% to 4.5%, but investors are keen to hear whether Chair Jerome Powell signals a possible rate cut later this year.

In addition to the Fed’s decision on Wednesday, investors will closely monitor a series of key U.S. economic indicators. June’s Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred measure of inflation, is due later in the week. Labor market data will also be in focus, with the Job Openings and Labor Turnover Survey (JOLTS) on Tuesday, ADP private payrolls on Wednesday, weekly jobless claims on Thursday, and the all-important July jobs report on Friday

Earnings season also hits a fever pitch, with more than 150 companies in the S&P 500 set to report results. Among the most closely watched will be the so-called “Magnificent Seven.” Meta Platforms and Microsoft are scheduled to report on Wednesday, followed by Apple and Amazon on Thursday. Investors are particularly focused on commentary related to artificial intelligence, as expectations remain high for continued capital spending in the sector.