Dollar gains against major peers after US-EU trade pact
U.S. President Donald Trump and European Commission President Ursula von der Leyen reached a framework trade agreement, which provides for an import tariff of 15 per cent 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 per cent at 0.80155 francs. It rose against the Japanese yen, up 0.29 per cent at 148.12.
The euro was last down 0.81 per cent 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 US and its partners that was seemingly foretold in February-June, the US and its key partners are instead in 'marriage counseling', 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 per cent 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 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 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 coming days from Apple, Microsoft, Amazon and Facebook parent Meta Platforms META.O, four of the "Magnificent Seven" whose stocks heavily influence benchmark indexes.
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