Dollar Stays Firm After US-EU Deal; Markets Brace for Fed and Tariff Moves

The euro weakened against the dollar for a second straight session on Tuesday, with EUR/USD falling 0.39%. This follows Monday’s sharp decline—the pair’s largest single-day loss since December 2024—amid a mix of weaker-than-expected U.S. labor data, improving consumer sentiment, and shifting global trade dynamics that favored the dollar.

Despite soft labor market figures, the dollar continued to strengthen. June’s Job Openings and Labor Turnover Survey (JOLTS) showed job vacancies fell to 7.437 million, down from 7.769 million in May and well below the 7.5 million expected. The data pointed to a cooling job market, reinforcing the view that U.S. employers are becoming more cautious amid rising trade and economic uncertainty.

At the same time, U.S. consumer sentiment showed surprising resilience. The Conference Board’s Consumer Confidence Index rose to 97.2 in July, up from 93.0 in June and ahead of expectations. However, the report also revealed persistent concerns about the labor market, with fewer respondents saying jobs are “plentiful” and more noting difficulty in securing employment. Geopolitical developments further buoyed the dollar. U.S. Treasury Secretary Scott Bessent confirmed that trade talks between the U.S. and China remain unresolved, though both sides have agreed to extend the current truce.

In Europe, the euro remained under pressure amid a light data calendar and the recent U.S.-EU trade agreement, which continues to tilt sentiment toward the greenback. Traders are now awaiting several key Eurozone economic indicators due later this week, including German retail sales, as well as GDP data from Germany, Spain, Italy, and the broader EU. The upcoming HCOB Manufacturing PMIs and inflation and employment figures for Germany and the Eurozone are also expected to play a significant role in guiding market direction. Meanwhile, attention is squarely on the Federal Reserve’s upcoming policy decision, with the central bank set to conclude its meeting on Wednesday.

Gold prices rose modestly on Tuesday as investors positioned themselves cautiously ahead of the Federal Reserve’s interest rate decision and ongoing trade discussions between the United States and China.

The rebound in prices follows a decline on Monday, when news of a preliminary trade framework between the U.S. and the European Union dampened demand for traditional safe-haven assets like gold. However, investor uncertainty remains elevated as attention shifts to more complex negotiations with China and the Federal Reserve’s policy outlook.

Following the conclusion of talks in Stockholm, China’s top trade negotiator, Li Chenggang, said both countries are seeking to extend the suspension of reciprocal tariffs. While recent agreements with the EU and Japan provided some relief, analysts caution that U.S.-China trade discussions are likely to be more drawn out and difficult to resolve.

Market analysts noted that despite the easing of some trade tensions, uncertainty around the outcome of negotiations with Beijing continues to support gold’s safe-haven appeal.

On the monetary policy front, the Federal Reserve is expected to keep interest rates steady at the conclusion of its two-day meeting on Wednesday. Investors will be watching closely for any forward guidance on the pace and likelihood of rate cuts in the coming months.

Gold tends to perform well in lower interest rate environments, as reduced yields on competing assets make the non-yielding metal more attractive by comparison.

With monetary policy and geopolitical developments in focus, investors are likely to maintain a cautious stance in the near term, keeping gold and other precious metals supported amid ongoing macroeconomic uncertainty.

Oil prices jumped more than 3% on Tuesday, climbing to their highest levels in over a month, as mounting geopolitical pressure from the United States on Russia and renewed optimism over global trade negotiations lifted market sentiment.

The rally followed comments from U.S. President Donald Trump, who announced that tariffs and additional punitive measures against Russia would begin “10 days from today” unless Moscow makes tangible progress toward ending its war in Ukraine.

In a further geopolitical twist, U.S. Treasury Secretary Scott Bessent warned Chinese officials that continued purchases of Russian oil could expose China to steep secondary tariffs under new U.S. legislation. His remarks came after two days of high-level talks aimed at defusing long-standing economic tensions between Washington and Beijing.  Adding to the bullish sentiment, a new trade deal between the United States and the European Union helped avert a broader trade conflict between two of the world’s largest economic blocs.

The agreement also outlines ambitious goals, including $750 billion in EU purchases of U.S. energy over the next three years and $600 billion in European investment into the U.S. during President Trump’s term.

In the U.S., weekly crude inventory data from the American Petroleum Institute showed a 1.54 million-barrel build in stockpiles last week, according to market sources. The U.S. Energy Information Administration is set to release official data on Wednesday, which could further shape near-term oil price direction.

As geopolitical risks mount and trade developments evolve, the oil market continues to reflect heightened sensitivity to both economic diplomacy and potential supply disruptions.

U.S. equities closed lower on Tuesday as investors weighed a flood of corporate earnings and lingering doubts over the outcome of U.S.-China trade negotiations.

Stocks initially found support following a weekend trade agreement between the U.S. and the European Union, but optimism faded as investors turned their attention to talks with China, which remain unresolved.

The uncertainty comes despite earlier agreements this year that had helped cool an escalating trade war. Those deals temporarily eased tensions, but markets are now bracing for the possibility of renewed friction over tariffs and access to key materials such as rare earth minerals.

Meanwhile, the Federal Reserve kicked off its two-day policy meeting, with the central bank expected to hold interest rates steady at 4.25%–4.5%. However, investors are closely watching for any signs of a shift toward rate cuts later in the year.

President Donald Trump has continued his public pressure campaign on the Fed, calling again for interest rate cuts to boost economic momentum.

Market participants are also eyeing key economic indicators this week, including June’s Personal Consumption Expenditures (PCE) Price Index—considered the Fed’s preferred inflation gauge—as well as labor data such as the JOLTS report, ADP private payrolls, jobless claims, and Friday’s highly anticipated July jobs report.

In the corporate arena, earnings season is entering its busiest stretch, with more than 150 S&P 500 companies slated to report. Major tech names including Meta Platforms and Microsoft are due Wednesday, followed by Apple and Amazon on Thursday.