Dollar hits one-month high versus euro
US President Donald Trump struck his biggest trade deal yet with the European Union on Sunday, which imposes a 15% import tariff on most EU goods and includes $600 billion of EU investments into the United States. That deal tops a $550 billion deal signed with Japan last week that includes a 15% reciprocal tariff. Investors are also eyeing ongoing trade discussions between the United States and China. Top US and Chinese economic officials met in Stockholm on Monday for more than five hours in a bid to resolve long-standing economic disputes at the center of a trade war.
The euro was down 0.44% against the dollar at $1.1538, hitting its lowest level since June 23. The single currency had dropped 1.29% in the previous session, its steepest one-day decline since mid-May. The euro is poised to record its first monthly loss against the dollar this year.
'After falling sharply in the first half of the year, the dollar began July with a bounce and I think it's mostly short covering, and the issue is whether this is a trend change or an overdue technical correction,' said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.37% to 98.98, rising to its highest level since June 23. The index is set to record its first month of gains this year.
'The market had a sigh of relief that the tariffs, at the least the plan announced with Japan and the EU and the likely 90-day extension with China, helped remove downside tail risk,' Chandler said. Several EU leaders have criticized the trade agreement reached with the United States. German Chancellor Friedrich Merz said his economy would suffer significant damage due to the agreed tariffs. France's prime minister on Monday called the agreement a 'dark day' for Europe.
Markets anticipate that the Fed will leave interest rates unchanged at the end of its monetary policy meeting on Wednesday. US Treasuries slipped on the session, with the yield on benchmark US 10-year notes fell 6.2 basis points to 4.358%.
'Ahead of (Wednesday's) Fed decision, we might get some consolidation. People are concerned about a possible dissent from at least one of the governors, maybe it's (Christopher) Waller or (Michelle) Bowman,' Chandler added.
The Bank of Japan also is likely to hold off raising interest rates on Thursday after the Japanese trade agreement with the United States last week.
The dollar was down 0.03% to 148.48 against the Japanese yen. Against the Swiss franc, the dollar strengthened 0.47% to 0.807 francs.
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