Jul 28, 2025 (Baystreet.ca via COMTEX) --
- EU/US reach tariff agreement.
- Equities firm, US dollar index climbs.
- US opens with gains across the board
USDCAD open 1.3726, overnight range 1.3689-1.3742, close 1.3702, WTI 65.77, Gold 3338.83
The Canadian dollar sank due to widespread US dollar demand following the news of the US amnd EU trade deal, which managed to remove a level of uncertainty from FX markets.
The Canadian dollar is also feeling pressure ahead of the looming August 1 deadline, when President Trump is expected to impose a 35% tariff on goods not covered under the USMCA. Prime Minister Carney reiterated that his government won't accept an unfavorable deal. However, if Canada takes the same approach as Brussels, it will, and the already sluggish domestic economy could deteriorate further, increasing the likelihood of a recession before the year ends.
Crude oil prices firmed modestly, with WTI trading in a 65.10-65.96 range. Sentiment was buoyed by optimism that reduced trade uncertainty between the US and EU could revive global demand for energy, lending support to prices.
Trump schooled EU President Ursula von der Leyen in the "Art of the Deal. "She agreed to a EU/US tariff deal which included a 15% tariff covering most EU imports except for aircraft and parts, semiconductor gear, and generic drugs while letting stand the existing 50% US duty on European steel and aluminum. In return, the EU gets nothing.
This week promises a potentially bumpy ride as thin summer liquidity converges with high-stakes catalysts. The FOMC decision looms large, alongside crucial economic releases like nonfarm payrolls and the PCE index. Throw in big tech earnings--Microsoft and Meta report Wednesday, followed by Apple and Amazon on Thursday--and the stage is set for volatility.
Equities closed on a mixed note in Asia. Australia's ASX 200 added 0.36%, Japan's Topix dropped 0.72%, and the Hong Kong's Hang Seng rose0.68%.
European equity markets cheered the trade headlines. France's CAC-40 jumped 0.70%, the DAX climbed 0.37%, and the FTSE 100 eked out a 0.10% gain. The 10-year US Treasury yield is 4.375%.
EURUSD sank to 1.1658 from 1.1771, with traders quickly concluding the so-called "deal" heavily favored the US. Von der Leyen's attempt to salvage optics by calling it a win for business certainty didn't move the needle. A clean break below 1.1610 opens the door to a test of 1.1450.
GBPUSD slumped from 1.3453 to 1.3407 as traders braced for another potential rate cut or two from the Bank of England. Sterling found a bit of footing on whispers that PM Starmer will soon meet Trump to hammer out a trade agreement that's rumored to be more generous than the EU's. Still, the broader picture remains bleak. Bridgewater's Ray Dalio described the UK economy as caught in a "doom loop" of rising taxes, tepid growth, and ballooning debt.
USDJPY moved up from 147.52 to 148.53, reflecting strong dollar demand and lingering political fallout in Japan after PM Shigeru Ishiba lost his Upper House majority. While the BoJ is widely expected to stand pat on Thursday, the post-meeting tone may strike a more hawkish chord thanks to the recently unveiled US-Japan trade accord.
AUDUSD churned between 0.6516 and 0.6586, sliding in response to the broad dollar rally sparked by the EU/US trade announcement. That said, downside momentum was cushioned by reports that Trump will extend the current China tariff freeze by another 90 days, with negotiations ongoing in Sweden.
COMTEX_467625898/2559/2025-07-28T10:12:45
