The US Dollar gains surged against major global currencies on Monday following the announcement of a significant trade agreement between the United States and the European Union. This development brought market certainty and temporarily calmed fears of a global trade war. As part of the agreement, U.S. President Donald Trump and European Commission President Ursula von der Leyen finalized a deal that would impose only a 15% tariff on EU imports—half the rate previously threatened by Washington. The deal represents a diplomatic breakthrough and signals a possible re-engagement between the U.S. and its allies.
In response, the dollar gained 0.82% against the Swiss franc, climbing to 0.80155 francs. It also rose 0.29% against the Japanese yen, reaching 148.12. Meanwhile, the euro dropped sharply by 0.81%, falling to $1.164275, its biggest daily loss since mid-May. Investors had initially reacted with optimism in Asia, but shifted positions as broader implications of the trade agreement favored dollar strength. Analysts believe this renewed dollar rally is less about short-term sentiment and more about a strategic shift in U.S. foreign policy.
Macquarie Group strategist Thierry Wizman noted that the market now sees the U.S. and its key economic partners not as rivals headed for “divorce,” but as parties undergoing “marriage counseling.” This shift in narrative suggests improved diplomatic ties and opens up the possibility for further cooperative trade frameworks in the near term.
Following this development, the dollar also gained ground against the British pound, which fell 0.24% to $1.3422. The euro, which had performed strongly earlier in the year, also weakened against the yen and sterling. Experts had previously expected the dollar to maintain strength, especially post-Liberation Day, but recent months saw the euro outpace the greenback amid fears of U.S. isolationist trade policies. However, the tide now seems to be turning as global investors reevaluate the stability of American economic policy.
READ MORE: EU Accepts 15% US Tariff in Landmark Trade Deal to Avert Trade War
The improvement in trade relations also shifts market focus toward central bank meetings in the U.S. and Japan. Both the Federal Reserve and the Bank of Japan are expected to hold interest rates steady this week. However, traders are closely watching for commentary on future policy moves. Investor sentiment could shift dramatically if the Fed signals any hawkish or dovish tone.
Additionally, earnings reports from major U.S. tech companies—including Apple, Amazon, Microsoft, and Meta—are due in the coming days. These companies hold significant sway over U.S. stock indexes, and strong financial results could prompt renewed capital flows into U.S. assets, further strengthening the dollar.
Earlier this year, the dollar had come under pressure amid fears that escalating tariffs would damage the U.S. economy. The recent trade truce with the EU, coupled with ongoing talks with China and Japan, marks a potential reversal of that trend. Top U.S. and Chinese officials are scheduled to meet in Stockholm to discuss a three-month extension of their current trade truce, which could also provide additional support for the dollar if successful.
Despite the dollar’s current strength, some analysts believe this may be a temporary trend. UBS Wealth strategist Anthi Tsouvali suggested that long-term dollar weakness is still possible, even though recent developments have brought a short-term consolidation. She pointed out that currency moves are also influenced by factors such as interest rate differentials and geopolitical stability, both of which remain uncertain.
In summary, the U.S. dollar’s upward momentum has been fueled by renewed optimism in global trade relations, central bank policy stability, and expectations of strong corporate earnings. Whether this momentum continues will largely depend on the outcomes of upcoming economic talks, policy statements, and market performance indicators in the weeks ahead.
