Greenback Rises on Strong Data; Asian Markets Mixed Ahead of Fed

On Friday, EUR/USD came under pressure amid broader market caution ahead of key economic events and geopolitical developments. However, sentiment turned more positive over the weekend after the United States and the European Union reached a significant trade agreement.

The new framework deal, finalized on Sunday, sets a 15% tariff on most European goods and is scheduled to take effect on August 1. The agreement brings an end to months of strained trade relations, reducing the risk of a broader conflict between the two major economies.

European Commission President Ursula von der Leyen stated that the EU will not pursue retaliatory tariffs under the terms of the agreement. She also announced that the bloc will commit an additional $600 billion in investment into the US economy, bolstering transatlantic ties.

Last week, the European Central Bank (ECB) kept interest rates unchanged, noting that disinflation is progressing in line with its projections. ECB policymakers emphasized the need for further data before adjusting their forward guidance.

Looking ahead, markets are focused on the Federal Open Market Committee (FOMC) meeting on Wednesday. The Fed is widely expected to leave its benchmark interest rate steady at 4.25%–4.50%. Investors will closely watch Chair Jerome Powell’s remarks for hints on the timing of potential rate cuts.

Gold prices extended their decline in early Asian trading on Monday, with Gold falling toward $3,335. The precious metal remains under pressure for the fourth consecutive session as improved global trade sentiment curbs demand for traditional safe-haven assets.

The downturn in gold follows Friday’s cautious trading, with market participants awaiting key developments in global trade and monetary policy. Sentiment shifted over the weekend after the United States and the European Union reached a landmark trade agreement, setting a blanket 15% tariff on goods traded between them. The deal, which ends a months-long impasse, is scheduled to take effect on August 1.

Further contributing to the risk-on tone, the South China Morning Post reported that the US and China are likely to extend their existing tariff truce by an additional three months, citing unnamed sources. The combination of reduced geopolitical risk and a stronger appetite for risk assets has weighed heavily on gold prices.

Meanwhile, attention turns to the US Federal Reserve's policy meeting this Wednesday.Despite ongoing pressure from President Joe Biden for rate cuts to support growth, Fed officials have signaled a cautious stance, preferring to wait for further clarity on economic conditions and the impact of tariffs.

Traders will be closely watching the FOMC press conference for any dovish signals that might indicate a timeline for rate reductions later this year. Should Fed policymakers hint at easing, gold could regain some support, as lower interest rates enhance the appeal of non-yielding assets like gold.

Oil prices declined on Friday, closing at their lowest levels in three weeks, as traders weighed downbeat economic data from the U.S. and China alongside signs of rising global oil supply. However, losses were capped by optimism over potential U.S. trade deals that could ultimately support economic growth and energy demand.

Despite global uncertainty, recent data indicated that the eurozone economy continues to show resilience. At the same time, European Central Bank policymakers have signaled a more cautious tone, dampening expectations for additional interest rate cuts.

In China, fiscal revenue fell 0.3% year-over-year in the first half of 2025, maintaining the pace of decline seen earlier this year. Slower revenue growth from the world’s second-largest economy has contributed to concerns over global demand and energy consumption.

On the supply side, the U.S. is reportedly preparing to allow Chevron and other partners of Venezuela’s state-run PDVSA to resume limited operations in the sanctioned country.

Iran also signaled it would continue nuclear negotiations with European powers after what it called “serious and detailed” talks—the first face-to-face meeting since recent strikes by Israel and the U.S. Any resolution in these talks could potentially allow more sanctioned Iranian crude to return to the market.

Both Venezuela and Iran are members of the Organization of the Petroleum Exporting Countries (OPEC). Any deal that allows increased exports from either nation would add to global supply.

Meanwhile, OPEC+—which includes OPEC members and allies such as Russia—is expected to stick to current production plans when its Joint Ministerial Monitoring Committee (JMMC) meets Monday.

U.S. equities continued their upward momentum on Friday, with the US 500 closing at a record high for the fifth consecutive session. Investors welcomed a strong start to earnings season and growing optimism surrounding upcoming trade agreements.

So far, 155 companies in the S&P 500 have reported second-quarter results, with nearly 83% surpassing Wall Street estimates. The better-than-expected earnings are reinforcing bullish sentiment and helping push key indices deeper into record territory.

Investor focus shifted to the geopolitical landscape as well. On Friday, President Donald Trump stated there was a "50-50 chance" of securing a trade agreement with the European Union during a scheduled meeting in Scotland on Sunday. The deal was ultimately finalized and announced that same day, marking the most significant among several recent trade agreements and providing a further boost to investor confidence.

Meanwhile, U.S. and Chinese officials are set to meet in Stockholm this week in an effort to extend their current trade negotiation deadline.

Although the U.S. and China signed a preliminary framework agreement earlier this year—reducing some tariffs—major levies ranging from 30% to 50% on Chinese imports remain in place. Talks now aim to reach a more comprehensive deal to ease trade friction between the world’s two largest economies.

Investors are bracing for another big week of earnings, along with Wednesday’s Federal Reserve policy decision. With trade tensions easing and corporate profits largely surprising to the upside, equity markets continue to find firm footing, even as economic uncertainties linger.