Forex overview: Trade Deal Adds to Market Euphoria – ForexNews.PRO
The announcement of a trade agreement between the US and the EU has positively influenced equity futures on both sides of the Atlantic. Investors are currently more concerned about a potential bubble than a recession. This agreement alleviates some of the pressure associated with the tariff deadline of August 1 and redirects attention to a week filled with significant macroeconomic data. We believe that the Federal Reserve meeting, along with inflation and employment data, can bolster the dollar.
USD: The Final Major Trading Week of Summer
The markets have reacted favorably to the news of the US-EU trade agreement. The terms of the deal align closely with what was speculated in the middle of last week, following a framework of 15% baseline tariffs and a commitment to substantial spending on US goods and energy. This agreement is an improvement over the previously threatened tariff rates of 30-50% from the past few months, although it may still be comparable to the universal tariff rates that were under discussion late last year.
The future of the pharmaceutical sector remains uncertain, as the results of a trade investigation are expected to be released later this week. In terms of significant trade agreements that are still pending, the market will continue to monitor potential deals with Asian countries (South Korea, Taiwan, India) and possibly any new developments regarding Mexico and Canada as well.
European leaders are likely hoping that this agreement will provide businesses with some stability and encourage much-needed investment. Consequently, investment intentions reflected in PMI surveys will be closely examined in the upcoming months.
Considering that a deal similar to this one was widely speculated last week, it is perhaps not surprising that foreign exchange markets have remained relatively stable overnight. Nevertheless, there is a substantial amount of macroeconomic data and central bank activities scheduled for this week, which we believe could lend support to the dollar.
