The US dollar surges after the US-European agreement, and the market is waiting for US data

On the Asian session on Tuesday, the U.S. dollar index hovered above 98.50, and the U.S. dollar rose against the euro and the Japanese yen on Monday as the market was boosted by a trade deal between the United States and the EU that brought some certainty to the market and avoided a global trade war.

Analysis of major currencies

Dollar: As of press time, the U.S. dollar index hovered around 98.65, and although trade easing has driven the rebound of the U.S. dollar index, the market focus is now turning to this week's Fed and Bank of Japan meetings. The two central banks generally expect to keep interest rates unchanged, but the market will carefully interpret the ngjpn.cnments after the meeting to find policy directions. If the Fed releases signals that interest rates are stable and overseas continues to maintain a dovish stance, the yield differences that have been suppressed by policy uncertainty may become more important again. HSBC's Paul McKel pointed out that recent trade agreements may reduce policy risks and make traditional foreign exchange drivers such as relative interest rates more important. From a technical perspective, the US dollar index is slightly higher than the 50-day simple moving average of 98.30 during the session. If it can continue to break through this level, it is expected to retest the high point of 98.95, with the next target level of 99.42.

Euro: As of press time, the euro/dollar hovers around 1.1595, as investors buy US dollars in news that the United States (US) and the European Union (EU) have reached a trade agreement similar to that signed by Japan. Across the Atlantic, the European Central Bank (ECB) keeps interest rates unchanged and takes a meeting in the decision-making ngjpn.cnmittee, as doves and hawksThere are differences between them. The EU's economic agenda will include retail sales data in Germany, growth data in Spain, Italy, Germany and the EU. In addition, traders are waiting for the release of HCOB manufacturing PMI, employment data and inflation data in Germany and the EU in Spain, Italy, Germany and the EU. Technically, the euro fell below the 20-day simple moving average (SMA) of 1.1693 and the 1.1600 mark after the EU-US trade news. The relative strength index (RSI) turns bearish, indicating that traders are taking profits on the pair and/or slightly bullish on the dollar. If the EUR/USD falls below the 50-day SMA of 1.1569, traders will expect to test 1.1500. Once it breaks through, the next target will be 1.1400. On the other hand, if the pair climbs above 1.1600, the SMA on the 20th will be at 1.1693.

GBP: As of press time, GBP/USD hovered around 1.3353. GBP/USD fell again at the beginning of the new trading week, falling for the third consecutive trading day, falling back below the 1.3400 mark, hitting a ten-week low. The US dollar (USD) rebounded across the board after months of weakness, sending the pound (GBP) below the key uptrend line. There is no important data released in the UK's economic calendar at all. However, pound traders will have enough data on the other side of the Atlantic to be busy. Technically, the weakness of the pound has once again become the focus, with the downward movement accelerating. After failing to break through the bullish push above the 1.3800 mark, the GBP/USD returned to the bearish range, failing to capture this critical technical level in early July and falling back to the key moving average below 1.3500. The pair has broken through the solid bullish trend line and is now retreating towards the 200-day index moving average (EMA) near 1.3130.

Summary of news from the foreign exchange market

1. Survey: The Monetary Authority of Singapore is expected to remain calm this week

The Monetary Authority of Singapore may maintain its monetary policy unchanged for the first time this week and adopt a wait-and-see attitude as policy makers measure upcoming U.S. tariffs, which may drag down economic growth. Of the 19 economists surveyed by the agency, 14 predicted that the Monetary Authority of Singapore would maintain its existing policy settings on Wednesday. Five ngjpn.cnpanies, including Goldman Sachs and Bank of America, expect the easing cycle to continue. Forecasters who expect to maintain the status quo pointed out that Singapore's economic stability is one of the reasons. Preliminary growth estimates this month showed the country escaped a technical recession, with manufacturing, service exports and construction leading higher-than-expected growth. Chua HakBin, an economist at Mayin Securities, believes that considering the resilience of the economic outlookSex and moderate but stable core inflation, the Monetary Authority of Singapore is expected to keep existing policy settings unchanged for the remainder of the year.

2. In July, the UK store prices hit the biggest increase in more than a year, and food prices rose strongly. A survey showed that in the 12 months to July, the UK store prices hit the biggest increase in more than a year, and food prices rose even stronger. The survey became another inflation signal, highlighting the Bank of England's interest rate dilemma. The British Retailers Association (BRC) said on Tuesday that the store price index rose 0.7% year-on-year in July, the biggest increase since April 2024, with food prices jumping 4.0%, the largest increase since February 2024. "As food bills for households will increase as food price inflation rises for the sixth consecutive month," said BRC CEO Helen Dickinson. "The global market supply is tight, with prices of staple foods such as meat and tea rising sharply, but discounts on fashion and furniture have given consumers a little relief.

3. Australia lifts restrictions on U.S. beef imports but the long-term growth prospects are hindered. According to the Wall Street Journal, US agricultural groups are pushing the EU and Australia to further open up their markets after the Trump administration announced a new trade agreement. The EU has long restricted the purchase of American meat and poultry, citing the United States' use of growth hormones and feed additives during production, which the United States says is to ensure food safety. Later last week, the Trump administration said Australia, the main beef producer, had agreed to lift restrictions on U.S. beef imports. The Australian government said the decision was based on a decade-long assessment of the improvements in US beef safety measures. However, it may take a long time for the United States to achieve a significant increase in beef exports to Australia. The Australian Meat and Livestock Association, which represents Australian ranchers, said 99% of the beef served in Australian bars, supermarkets and restaurants ngjpn.cne from their home countries. The association said: "The possibility of large-scale import of American beef to Australia is extremely small."

4. The US-EU trade agreement may mean that the ECB has suspended interest rate cuts for a long time.

Galbraith of Amber Investments said in a report that the trade agreement between the United States and the EU has increased the risk of the ECB not further cuts. She said the ECB could wait until December to cut interest rates, or it could keep interest rates unchanged throughout 2025. Galbraith said the trade deal could slightly push Amber’s forecast for growth and inflation in the euro zone. Ampon's forecasts the ECB will eventually cut interest rates in December before the U.S. trade deal with the EU. Galbrace said: "Risk balance may tend to end interest rate cuts will not happen at all."

5. CBI survey: The UK retail industry sluggishly extends to the 10th month

The British Federation of Industry (CBI) survey showed that the UK retail sales decline in July continued to the 10th month, as prices rose to pressure consumers, but the decline was not as high asJune. The monthly indicator of retail sales, CBI's monthly measurement of retail sales ngjpn.cnpared to the same period last year, was -34 this month, an improvement from -46 in June, but it is still a sign of weak demand. "Business reports that rising price pressures driven by rising labor costs and economic uncertainty continue to drag down household demand have led to a decline in sales since October 2024," said Sartorius, chief economist at the agency. Employers' group said the Chancellor's decision to raise social security payments for employees and raise minimum wage standards has led to higher prices. Sartorius said weak demand was reflected in the entire distribution industry, with sales in the wholesale and automotive industries also falling.

Institutional View

1. Deutsche Bank: The US-EU trade agreement reduces the need for the ECB to cut interest rates

Deutsche Bank analyst Mark Wall said that the US-EU trade agreement reduces the need for the ECB to cut further interest rates. Because after the agreement is reached, the uncertainty of eurozone trade policy will decline, and the pressure on the ECB to further cut interest rates will be reduced. The euro zone currency market is expected to be less than 60% likely to cut interest rates in December this year, and the European Central Bank is unlikely to cut interest rates in September or October.

2. Dutch International: The euro fell under pressure. The Federal Reserve is expected to keep interest rates unchanged this week.

Dutch International analyst Chris Turner said in a report that the foreign exchange market has limited response to the US-EU trade agreement because there was already expectations of an agreement last week. The euro fell under pressure as the market awaited the Fed's interest rate decision this week. The market generally expects the Federal Reserve to keep interest rates unchanged. Dutch International Group expects the euro to fall to 1.16 against the dollar if the Fed continues to resist political pressure on interest rate cuts. Data shows that the money market is not expected to cut interest rates by October.

3. Bank of America: Trade agreement reduces uncertainty, Bank of Japan may adjust its policy tone this week

Bank of America economists said in a report that the Bank of Japan may send a signal that the position will turn to a less moderate position. The market generally expects that the Bank of Japan will maintain a policy interest rate of 0.5% at this week's monetary policy meeting. But given Japan's recent trade deal with the United States, it may adopt a less modest tone. The agreement reduces a huge uncertainty, which the Bank of Japan has pointed out as one reason for delaying austerity policies.

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