The US-EU agreement on a trade 'framework,' combined with hopes for a 90-day extension of the US-China tariff pause, brings cautious optimism to the markets. This comes as Trump prepares to meet UK Prime Minister Starmer, and the EU accepts Trump’s 15% tariffs.
Still, the market remains cautious ahead of a busy week with key events, including the US FOMC meeting, advance readings of US and EU Q2 GDP, the US jobs report, the Fed’s preferred inflation data, the BoJ’s monetary policy meeting, and China’s official PMI. Additionally, market anxiety is rising as Trump expressed disappointment in a call with Israel’s PM Netanyahu and is pushing for increased weapon sales to Ukraine.
Despite a recent two-day recovery and a weekly decline, the US Dollar faces pressure from these uncertainties. Beyond these major catalysts, Q2 earnings from US tech giants like Apple and the White House’s ‘crypto report’ will add to the market’s attention during this potentially volatile week.
Trade negotiators from the European Union (EU) and the United States (U.S.) reached a trade deal framework on Sunday after much back-and-forth. The agreement includes a 15% blanket tariff on most EU goods, a $600 billion investment into the U.S., and a commitment to purchase around $750 billion worth of U.S. gas over time, though exact details are still being finalized. In a related development, U.S. President Donald Trump will meet United Kingdom (UK) Prime Minister Keir Starmer on Monday, while U.S.-China trade negotiators are expected to agree on a second 90-day pause in tariff actions during talks in Stockholm today. Japan has welcomed the recent U.S. trade developments, citing a reduction in global uncertainty.
Meanwhile, the Organization of the Petroleum Exporting Countries Plus (OPEC+) will meet on Monday and is expected to maintain its current output increase policy, despite some OPEC members failing to follow the group’s supply plans. Bloomberg reports that both the International Energy Agency (IEA) and the U.S. Energy Information Administration (EIA) anticipate an oil surplus in the coming year.
On the economic front, U.S. Durable Goods Orders for June came in better than expected on Friday, but the underlying details were weak and the figures were lower compared to May, sparking fresh concerns about potential interest rate cuts by the Federal Reserve (Fed). Although the Federal Open Market Committee (FOMC) is not expected to adjust monetary policy at its July 30 meeting, last week’s pause by President Trump in his efforts to pressure Fed Chair Jerome Powell for more rate cuts offered temporary relief to the U.S. Dollar. However, investor caution ahead of a critical week continues to weigh on the U.S. Dollar Index (DXY).
This cautious sentiment has helped Gold rebound from a 10-week support level, ending its three-day losing streak. Cryptocurrencies also remain firm, while U.S. stock futures and Asia-Pacific equities are slightly higher. Crude Oil recovers some ground after prior losses, U.S. bond yields are mildly up, and Japanese bond yields decline.
A nearly finalized trade deal between the United States (U.S.) and the European Union (EU) has eased pressure on the bloc after days of uncertainty. This, along with weak U.S. economic data and a softer U.S. Dollar, helps EURUSD post its first daily gain in three sessions. However, dovish remarks from European Central Bank (ECB) official Joachim Nagel and weak EU data limit the upside as a key data-packed week begins.
Meanwhile, U.S. President Donald Trump and United Kingdom (UK) Prime Minister Keir Starmer are set to meet today to finalize the trade deal framework agreed in May. Unlike other recent U.S. trade frameworks, the UK agreed to a 10% tariff demand, earning favor from Trump. Still, with full terms not yet settled, any disagreement from Starmer could prompt Trump to impose higher tariffs, which keeps pressure on GBPUSD for a third straight day—even as the U.S. Dollar weakens.
USDJPY rises for a third day despite lacking strong bullish signals. The gains likely stem from expectations that the Bank of Japan (BoJ) will keep rates unchanged, optimism around U.S. trade deals, and prospects of supportive U.S. data and events this week. Supporting the move, Japan’s Chief Cabinet Secretary Hayashi noted that recent U.S.-EU and U.S.-Japan trade agreements have reduced uncertainty around U.S. trade policy, helping the Yen pair edge higher.
Despite the U.S. Dollar struggling to extend its two-day winning streak, weak industrial profits from China and market caution ahead of a data-heavy week continue to pressure AUD/USD and NZD/USD for the third straight day. In contrast, USD/CAD slips after a two-day rise, as stronger Crude Oil prices—Canada’s key export—support the Canadian Dollar (CAD). Adding to the pressure on the Antipodeans and CAD are investor nerves ahead of Australia’s upcoming inflation data and China’s official Purchasing Managers’ Index (PMI) releases for July.
Crude Oil posts mild gains, recovering from Friday’s sharp losses—the biggest since mid-July—supported by trade deal optimism and market consolidation ahead of today’s Organization of the Petroleum Exporting Countries Plus (OPEC+) meeting, where the group is expected to defend its output increase policy. The cautious market mood and a struggling U.S. Dollar also support the rebound.
However, Bloomberg earlier reported that both the International Energy Agency (IEA) and the U.S. Energy Information Administration (EIA) expect an oil surplus next year, challenging bullish sentiment. In contrast, early signals from OPEC+, shared via oilprice.com, suggest the cartel remains optimistic about future demand, despite mixed signals on China’s energy consumption. While OPEC+ plans to raise output by 548,000 barrels per day in August, non-compliance by some members could affect the expected supply increase.
Gold rebounds from a 10-week support level, ending a three-day losing streak as the U.S. Dollar struggles and investors turn to safe-haven assets amid uncertainty ahead of this week’s key economic data and trade meetings. Adding to the support, the World Gold Council (WGC) reported continued gold buying by China and rising global demand, especially from central banks and Exchange-Traded Funds (ETFs).
Bitcoin (BTCUSD) extends its winning streak to three days, while Ethereum (ETHUSD) hits a new yearly high during a five-day rally. The surge is driven by market optimism ahead of the White House’s upcoming crypto report and former U.S. President Donald Trump’s push to make the United States the global crypto leader. Technical breakouts also support the rally after last week’s struggles.
Monday’s economic calendar is relatively quiet ahead of Wednesday’s key events. However, U.S. trade talks with the United Kingdom (UK) and China, along with market reactions to the recent U.S.-European Union (EU) trade framework, may keep risk assets supported and limit the U.S. Dollar’s strength before the upcoming Federal Open Market Committee (FOMC) meeting.
If Federal Reserve (Fed) officials acknowledge inflation challenges and the U.S. Core Personal Consumption Expenditures (PCE) Price Index rises—as expected—the U.S. Dollar may see a short-term bounce. However, renewed pressure from former U.S. President Donald Trump for more rate cuts or to remove Fed Chair Jerome Powell could cap any gains.
On the other hand, softer second-quarter U.S. Gross Domestic Product (GDP) and a weak monthly employment report may drag the Greenback lower, supporting Gold, cryptocurrencies, and Antipodean currencies, while leaving major currencies mixed.
Meanwhile, equities could extend their rally, as strong earnings reports are expected to lift the Nasdaq, S&P 500, and Dow Jones Industrial Average (DJI30) to fresh record highs.
May the trading luck be with you!
