On July 28, 2025, the U.S. dollar gained ground against major currencies like the euro and yen, fueled by a new trade agreement between the United States and the European Union. This deal, announced by President Donald Trump and European Commission President Ursula von der Leyen, sets a 15% import tariff on EU goods—half the rate Trump had initially threatened to impose starting August 1. The agreement has calmed fears of a global trade war, boosting market confidence and supporting the dollar’s rise.
The dollar climbed 0.82% against the Swiss franc to 0.80155 francs and 0.29% against the Japanese yen to 148.12. Meanwhile, the euro took a hit, dropping 0.81% to $1.164275, marking its largest daily loss since mid-May. The euro also weakened against the yen and British pound, despite earlier hitting a one-year high against the yen and a two-year high against the pound.
Why the Dollar Is Gaining
The trade pact has shifted investor sentiment. Thierry Wizman, a global currency strategist at Macquarie Group, noted that the dollar’s strength reflects perceptions that the deal favors the U.S. and signals a thawing in relations with key allies. “Rather than a ‘divorce’ between the U.S. and its partners, they’re now in ‘marriage counseling,’” Wizman wrote, suggesting the U.S. is rebuilding ties with the EU and others.
This comes after a turbulent year for the dollar, which weakened earlier in 2025 due to fears that high tariffs would harm the U.S. economy. Investors had been moving away from U.S. assets, driving the euro higher than expected. Anthi Tsouvali, a strategist at UBS Wealth, remarked, “No one thought the euro would be this strong. We expected the dollar to hold firm, but it’s been consolidating and may weaken further in the long term.”
Beyond the Trade Deal
The U.S.-EU agreement follows a similar deal with Japan last week, and talks with China are set to resume in Stockholm to extend a trade truce. These developments have reduced concerns about severe tariffs, allowing investors to focus on other factors, like upcoming corporate earnings and central bank decisions.
The Federal Reserve and the Bank of Japan are expected to keep interest rates steady this week, but their comments could hint at future moves. President Trump has been pushing the Fed for significant rate cuts, even hinting at firing Fed Chair Jerome Powell, though he backed off after considering market backlash. Investors are also watching earnings from tech giants like Apple, Microsoft, Amazon, and Meta Platforms, as strong results could pull investment back into U.S. markets, further impacting currency trends.
What It Means
The U.S.-EU trade deal has brought a sigh of relief to global markets, strengthening the dollar and shifting focus to economic indicators like earnings and interest rates. While the euro has lost some ground, the broader outlook for currencies remains uncertain as trade talks and policy decisions unfold. For now, the dollar’s rebound reflects renewed confidence in U.S. economic stability, but its long-term path depends on how these global dynamics play out.
