July 29, 2025

“The market has reacted very poorly to the US-EU trade deal, which involved a series of unilateral concessions from the EU that are still expected to damage growth, even if the tariff rate is lower than it could have been. The dollar has gained 2% against the euro this week and is heading higher this morning.”

Tim Hallinan – Trading Director

USD

The dollar rallied 1.3% versus the euro and more than 0.5% against most of the G10 yesterday, as the US-EU trade deal agreed over the weekend left a sour taste and investors began to pull back on the dominant short dollar trade. The market seemed relatively happy at first that 30% tariffs would not hit this Friday and that some element of certainty would return for US and EU businesses. But concerns quickly grew about a) how easily the EU negotiators seemed to submit to Trump’s demands with unilateral concessions, and b) the still significant economic damage headed Europe’s way. That Trump might simply get what he wants without all-out trade wars was a positive for the dollar broadly.

The dollar’s gains have shown few signs of stalling so far this morning. The data points out today include the JOLTS Job Openings figure, which is expected to have cooled from 7.8M to 7.5M in June, and consumer confidence for July. The Fed decision tomorrow night is the event that markets have their eye on, and it could fuel the dollar’s recovery further if officials push back against a September rate cut.

GBP

With the dollar’s 2% gain since Thursday, GBPUSD is now heading for a 3.4% overall loss for July. GBPEUR has enjoyed some respite, however, as the euro’s worse performance has pushed the pair up 1.1% over the last day or so. Generally, this is going to be a week where sterling is at the mercy of developments abroad – that has clearly been the case so far. There are some mortgage approvals and consumer lending data this morning, however, and a clash between Reeves and Bailey over Revolut’s banking authorisation is making some headlines.

EUR

EURUSD is down 2% already this week as sentiment has tanked about the US-EU trade deal. It is not just the markets that have disapproved, with European leaders aligned with their disappointment – German Chancellor Merz warned of ‘significant’ damage; France called it a ‘dark day’ for Europe; and Spanish Prime Minister said he would back the deal but ‘without any enthusiasm’. The eurozone data diary has kicked off today with Spanish Q2 GDP, which printed a touch higher than expected at 0.7%. The French growth figure and Spanish CPI follow tomorrow, ahead of the bloc-wide data later in the week.

Markets

The market appears to have judged that the certainty associated with US-EU trade deal was only a small net negative for equities, even if FX was much more displeased with how much the EU had given away.  The European stock indexes dropped yesterday but are all broadly positive this morning.

Main Economic Events (All Times CET)

1:01am: UK BRC Shop Price Index
10:30am: UK Mortgage Approvals
4:00pm: US JOLTS Job Openings & Consumer Confidence

To learn more about Ballinger Group, please visit our website or our LinkedIn page.