After initial optimism about the U.S.-EU trade ‘framework’ agreement, market players re-evaluated the EU’s response and scaled back earlier positive bias. France criticized the deal, and Germany showed little support. Similarly, U.S.-China officials didn’t announce a 90-day tariff pause during their meeting in Stockholm, extending talks to Tuesday. The meeting between U.S. President Donald Trump and UK Prime Minister Keir Starmer also failed to provide details on a final U.S.-UK trade deal, instead focusing on political issues, dampening previous trade optimism.
Elsewhere, President Trump expressed frustration over the lack of peace between Ukraine and Russia, giving Moscow 10-15 days to finalize talks, down from 50 days mentioned in early July. If talks fail, the U.S. will impose heavy sanctions on Russia, including 100% secondary tariffs on countries importing Russian oil—particularly targeting China and India, which’ve increased oil imports since the war. In response, Dmitry Medvedev, an advisor to Russian President Putin, accused Trump of playing a “game of ultimatums” with Russia.
Trump also showed readiness to engage with North Korea if it doesn’t end its nuclear programs, following North Korea's rejection of being denied nuclear status. Additionally, Trump blocked Taiwan’s President from stopping in New York, citing objections from China. In the Middle East, Trump seemed less supportive of Israel’s stance on humanitarian aid to Gaza, while criticizing Iran’s behavior. Meanwhile, UK PM Keir Starmer stated that Hamas has no place in any future Palestinian government.
On the economic front, with a lack of major data and a cautious mood ahead of Wednesday’s Federal Open Market Committee (FOMC) meeting, trade and political uncertainties helped fuel the U.S. Dollar. The U.S. Dollar Index (DXY) posted its biggest daily gain in 11 weeks. This, combined with EU leaders’ disappointments over the EU-U.S. trade deal and dovish European Central Bank (ECB) comments, weighed on the EUR/USD, pushing it down the most since early May.
Trump also reiterated his push for lower interest rates, though he refrained from commenting on firing Federal Reserve Chairman Jerome Powell, saying, “He leaves fairly soon. I will miss him greatly.” Meanwhile, the U.S. Treasury signaled plans to increase federal borrowing to $1 trillion in Q3, with a quarterly refunding announcement expected today, which could affect markets and put pressure on the U.S. Dollar if the government continues issuing Treasuries to fund its deficit.
In the UK, the GBP/USD dropped to its lowest point since May 20, marking its fifth consecutive day of losses. The lack of progress in U.S.-UK trade talks, coupled with weak UK retail data and the fastest rise in the UK shop price index since April 2024, added to the downtrend.
In Asia, Japanese policymakers remained optimistic about trade, and the Bank of Japan (BoJ) signals seemed hawkish, though the BoJ is expected to keep interest rates unchanged at its August meeting. In Canada, Prime Minister Mark Carney stated that trade talks with the U.S. are in an intense phase.
The Australian Dollar (AUDUSD) faced a three-day losing streak, while the New Zealand Dollar (NZDUSD) seesaws after falling for three consecutive days. The USDCAD rose for three days before retreating due to a jump in crude oil prices, driven by OPEC+ inaction and geopolitical tensions affecting energy supplies.
The U.S. Dollar’s strength and month-end consolidation caused gold to break the crucial $3,330 support, extending its four-day losing streak before recovering from a three-week low. Meanwhile, Bitcoin (BTCUSD) saw its biggest daily fall in almost two weeks, while Ethereum (ETHUSD) reversed from its yearly high, marking its largest daily loss since July 23 after ending a four-day winning streak.
U.S. Treasury bond yields rose, while Japanese yields dropped. U.S. stock markets started the week on a positive note, with the Nasdaq and S&P 500 moving toward record highs, though the Dow Jones closed with minor losses. The overall market sentiment remained cautious, with mixed trade and political updates ahead of key Q2 earnings results this week.
France harshly criticized the EU-US trade deal, and Germany showed little optimism, weighing on the EURUSD amid rising trade and political uncertainty in Europe. Talks about the European Central Bank’s (ECB) potential rate cuts and economic pressures, combined with a stronger U.S. Dollar, pushed the EURUSD to a two-week low after its largest daily drop in 11 weeks.
Meanwhile, USDJPY rose for three consecutive days but retreated from a one-week high, facing its first daily loss in four. Concerns over the Bank of Japan's (BoJ) rate hike plans and mixed clues on Prime Minister Ishiba’s government supported the Japanese Yen (JPY) due to its haven appeal. This, combined with cautious market sentiment ahead of this week’s Federal Open Market Committee (FOMC) meeting, BoJ announcements, and other major events, contributed to the pullback in USDJPY.
GBPUSD dropped due to the absence of updates on the U.S.-UK trade deal, UK Prime Minister Starmer’s focus on political issues, and weak UK data, including disappointing CBI Retail Sales and a sharp rise in the shop price index per the British Retail Consortium. The strength of the U.S. Dollar ahead of key events starting Wednesday further pressured the Cable pair, especially as the UK has little positive news to support the pound.
AUDUSD and NZDUSD halted their three-day losing streaks, reaching their lowest levels in over a week, while USD/CAD paused at its weekly high after rising for three consecutive days. The cautious market sentiment, lack of positive news from China, and a stronger U.S. Dollar weighed on the Antipodean currencies. Meanwhile, USDCAD’s retreat was likely influenced by a recent jump in crude oil prices amid OPEC+ and geopolitical tensions.
Crude oil surged the most in nearly four weeks, driven by OPEC+ sticking to its output policy and rising geopolitical tensions, helping it recover from a two-week downtrend, despite the stronger U.S. Dollar.
Gold dropped for the fourth straight day, breaking the crucial $3,330 support before stabilizing. The precious metal struggled to capitalize on its safe-haven status, weighed down by the firmer U.S. Dollar and month-end consolidation, as it failed to break key upside technical levels, especially with cautious market sentiment ahead of this week’s major events.
Forex and crypto traders both adopted a cautious stance on Monday ahead of the White House’s important crypto report, scheduled for release on July 30. Bitcoin (BTCUSD) and Ethereum (ETHUSD) were also impacted by forced liquidations of large long positions. Additionally, month-end positioning contributed to a pullback in top cryptocurrencies before a slight bounce on early Tuesday.
Unlike Monday’s light economic calendar, Tuesday brings key U.S. data: CB Consumer Confidence, JOLTS Job Openings, and the Housing Price Index. While these may not drastically impact the U.S. Dollar unless extreme, traders will likely position themselves for Wednesday’s FOMC, U.S. Q2 GDP, and Friday’s U.S. NFP. Any signals ahead of these events could lead to a pullback in major currencies, cryptocurrencies, and commodities, giving them room for a correction before key catalysts.
Beyond the data, ongoing discussions about U.S. trade deals and geopolitical tensions (Russia, Ukraine, Israel, Iran, Gaza, North Korea, and China) will keep traders on edge. If trade optimism wanes and risks rise, the U.S. Dollar could maintain its strength, potentially weighing on major currencies like the Euro (EUR), British Pound (GBP), and Gold. Crude oil prices may also be influenced by weekly U.S. API inventory readings and OPEC+ updates.
Ultimately, the real action begins Wednesday, and anything before that is likely just consolidation.
May the trading luck be with you!
