Summary
- Trump announced a major trade deal with Japan cutting
auto tariffs to 15%, down from a threatened 25%. - Japan committed to invest $550 billion in the U.S.,
aiming to create hundreds of thousands of jobs. - The deal includes expanded U.S. access to Japanese
markets for cars, trucks, rice, and agricultural goods. - Japanese stocks, especially automakers, surged
following the announcement; the Nikkei rose 3.5%. - The agreement sets a benchmark for other pending U.S.
trade deals and came just before an August 1 tariff deadline.
On Tuesday, President Donald Trump announced a
trade agreement with Japan that would reduce auto import duties to 15% in
return for a $550 billion package of loans and investment destined for the
United States. It is the most important of a number of deals that Trump has
secured since announcing broad international taxes in April.
With a gain versus the Swiss franc, the dollar
is poised to end three consecutive losing sessions. The most recent increase
was 0.24% to 0.79425.
As U.S. Treasury yields increased, all of Wall
Street’s major indices were rising as well.
Following news that Ishiba plans to resign next
month after a crushing defeat in the upper house election, the dollar fell
against the yen, reaching its lowest level since July 11 at 146.20 per dollar.
Ishiba denied the reports that he had decided to
resign, calling them “completely unfounded.” The yen was last down
0.06% at 146.565 yen.
“The main thing driving USD/JPY has to do
with political anxiety as it looks like the prime minister is feeling some
pressure to consider resigning,”
Juan Perez, senior director of trading at
Monex USA in Washington, told Reuters in a statement.
“This deal helps automakers, for now, but
leaves markets also wondering if at any point tariffs can be increased since
they will not go away as tools for negotiating anything and everything. Japan,
an advanced economy agreeing to new terms for trade does leave concern that
successful tariff use will give incentive to keep using their threat.”
According to two officials who spoke to Reuters,
the United States and the European Union are moving toward a trade agreement
that would impose a general 15% tariff on EU goods imported into the United
States. The agreement would resemble one that the United States made with
Japan.
At $1.176250, the euro was up 0.08% versus the
dollar after reversing earlier losses.
Since Trump’s announcement on April 2 of broad
tariffs on trading partners, the U.S. dollar has been among the major
currencies that have suffered the most. Although it has stabilized this month,
the weakening persisted after those duties were put on hold to facilitate
additional negotiations.
The August 1 deadline for tariff deals still
looms for many countries and investors remain cautious on how it will play out.
The dollar index , which measures the greenback
against a basket of currencies including the yen and the euro, fell 0.14% to
97.33, on track for four straight sessions of losses.
“I think what the market is expecting is
that there will be a blanket tariff of a certain amount: let’s just say 10% or
so, and that has been set in place for quite a while. And I believe that it’s
discounted,”
said Jeff Young, head of investment strategy, at PGIM
Quantitative Solutions in New Jersey.
“The effect on the dollar is going to be
… folded into the overall macro picture. And I think it’s going to be
difficult to disentangle the exact impact of the tariff versus all the other
things that are affecting the currency because I do think that a lot of that is
pretty much already discounted.”
At $1.35690, sterling was up 0.26%.
The Australian dollar reached its highest level
in eight months and was last up 0.4% at $0.6584.
How do forecast models predict USD/CHF will
react after testing support at 0.7845?
Models suggest a potential rebound or bounce
upward, possibly initiating a near-term bottom. This could lead to a rally
toward resistance levels around 0.8045 to 0.8190, aligned with previous
horizontal barriers and the top of a descending trendline.
Confirmation would come from price retesting the
broken downtrend line as new support with weakening bearish momentum, signaling
a possible trend reversal or corrective upswing.
A downside continuation is likely, triggering
increased selling pressure. The pair could drop toward lower floor levels near
0.7780 and further down toward 0.7725 or even below, resuming or accelerating a
bearish trend. This move may reflect broader USD weakness and increased
safe-haven demand for the Swiss franc.
