US-EU strike trade deal, euro rises

Today’s headlines

What’s happening: The euro rose against the US dollar on Monday following the announcement of a trade deal between the US and the European Union.

What happened: The agreement will result in a 15% tariff on most exports from the EU, easing trade tensions and boosting demand for the euro.

Weakness in the US dollar lent further support to the EUR/USD forex pair.

Why it matters: The US and EU reached a framework trade agreement, avoiding a transatlantic trade war. The deal was reached just before the August 1 deadline for US to impose a 30% tariff rate on EU imports in case no agreement was reached.

The latest is one the most important of trade deals announced by Trump so far, after preliminary agreements with the UK, Japan, Indonesia, Vietnam and the Philippines.

The deal came after a meeting between US President Donald Trump and European Commission President Ursula von der Leyen in Scotland on Sunday.

The EU is the biggest trading partner for the US, with trade in goods and services hitting around $2 trillion last year. The deal will impose a 15% tariff to most European exports, including automobiles.

Trump also said that the EU is looking to invest around $600 billion in the US and significantly boost its purchases of US energy and military equipment.

Some weakness in the US dollar also provided support to the EUR/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, slipped to 97.63 this morning.

The EUR/USD pair gained around 0.1% to reach 1.1755 this morning, while the EUR/GBP forex pair edged higher to 0.8748.

What to watch: Investors will continue monitoring trade-related announcements, with senior negotiators from the US and China due to meet in Stockholm today for extending a trade truce.

Data on GDP growth rate, consumer confidence and economic sentiment, due to be released from the Eurozone on Wednesday, will also remain in focus. The Eurozone’s economy, which grew by 1.5% year-over-year in the first quarter, is expected to expand by 1.2% in the second quarter.

Analysts expect the economic sentiment indicator to rise to 94.8 in July, from 94 in June, while the consumer confidence indicator is projected to improve to -14.7 in July, from -15.3 the previous month.

The markets today

Asian stocks in focus today ahead of the third round of trade talks between the US and China

Context: Equity markets in Asia traded mixed this morning as investors digested the latest economic reports.

Details: US Treasury Secretary Scott Bessent and China’s Vice Premier He Lifeng are scheduled to meet in Stockholm today, to try and reach a trade deal between the world’s two largest economies.

Bessent indicated that the talks could result in an extended truce, with negotiations projected to cover a broader agenda beyond tariffs. Both countries are widely expected to extend their tariff truce by another three months.

Meanwhile, data released from the Finance Ministry showed China’s fiscal revenue declined by 0.3% year-over-year in the first half of the year to 11.56 trillion yuan. The latest reading came unchanged from the decline posted during the January–May period.

Profits at China’s industrial firms fell 1.8% year-over-year to 3.44 trillion yuan in the first half of the year, after a 1.1% decline in the January to May period. The latest reading highlighted rising trade concerns amid broad US tariffs.

Japan’s Nikkei 225 fell 0.82% to 41,114.52 this morning, while China’s Shanghai Composite gained 0.29% to 3,603.98 and Hong Kong’s Hang Seng Index surged 0.97% to 25,633.53.

What to watch: Trade-related announcements from the US will remain in focus and are expected to provide further direction to Asian markets ahead.

Data on Japan’s industrial production, retail sales and foreign bond investment, due to be released this Thursday, will also remain in focus. Japan’s industrial production, which declined 0.1% in May, is expected to decline by 0.7% in June. Analysts expect retail sales in Japan to grew by 1.8% year-over-year in June, following a 2.2% gain in May.

Other Markets: US trading indices closed higher on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.47%, 0.40% and 0.23%, respectively.

The news shaping the markets

Ukraine’s drones reportedly hit a radio and electronic warfare equipment facility in the Stavropol region of Russia. The news sent the RUB/USD pair lower in forex trading this morning.

Canada’s government recorded a budget deficit of C$0.23 billion in May, versus a surplus of C$1.172 billion in the year-ago month, exerting pressure on the CAD/USD forex pair.

Brazil’s mid-month consumer prices climbed 0.33% during the first half of July, accelerating from 0.26% in June. The latest reading coming in above market estimates of 0.3% sent the BRL/USD pair lower in forex trading this morning.

UK’s retail sales grew 0.9% in June, recovering from the 2.8% decline in the previous month. However, the latest reading missed market estimates of 1.2%, exerting pressure on the GBP/USD forex pair.

Taiwan’s consumer confidence index rose to 64.38 in July, from 63.7 in the previous month. However, the TWD/USD pair fell in forex trading this morning.

What else to watch today

UK’s CBI distributive trades (1400 UAE Time), India’s industrial production (1430 UAE Time) and manufacturing production (1430 UAE Time), Brazil’s bank lending (1530 UAE Time), Mexico’s balance of trade (1600 UAE Time) and unemployment rate (1600 UAE Time), Canada’s wholesale sales (1630 UAE Time), France’s 12-month BTF auction (1700 UAE Time), 3-month BTF auction (1700 UAE Time) and 6-month BTF auction (1700 UAE Time), as well as US Dallas Fed manufacturing index (1830 UAE Time), 2-year Note auction (1930 UAE Time), 6-month Bill auction (1930 UAE Time), 3-month Bill auction (2100 UAE Time), 5-year Note auction (2100 UAE Time) and Treasury refunding financing estimates (2300 UAE Time).