Dollar Surges as US-EU Trade Deal Boosts Confidence; Markets Brace for Fed, China Talks & Tech Earnings

The U.S. dollar surged, extending its July rally, following a new trade agreement between President Donald Trump and the European Union. This deal has bolstered investor confidence, particularly as U.S. and Chinese officials kick off crucial two-day talks aimed at extending their tariff truce beyond a mid-August deadline. The euro, meanwhile, experienced its largest slide in over two months.

Analysts suggest the dollar’s strength reflects a perception of the EU deal favoring the U.S. and America’s re-engagement with key allies. Peter Boockvar of Boock Report notes that getting “big deals out of the way” allows businesses to adjust and plan, shifting focus to their long-term implications. Brent Schutte at Northwestern Mutual Wealth Management Co. believes that more trade deals could ease economic uncertainty.

This week is proving to be exceptionally busy for markets, with traders closely watching a raft of key economic data, including jobs and inflation figures, ahead of the August 1 U.S. tariff deadline. The Federal Reserve’s meeting on Wednesday is a major highlight, where rates are widely expected to remain unchanged, though analysts anticipate stronger signals for potential fall cuts if inflation remains muted.

Adding to the market’s dynamism, a string of major tech companies are reporting earnings, including Microsoft, Meta Platforms, Apple, and Amazon. Corporate America has largely absorbed tariffs, with approximately 82% of S&P 500 firms beating profit forecasts, signaling a strong earnings season.

Despite some market volatility, analysts like John Stoltzfus of Oppenheimer Asset Management predict a third consecutive year of 20% S&P 500 gains if trade negotiations continue to progress. While valuations are high, market strategists note strong technical momentum and fundamental strength, with some predicting a “melt-up” if sentiment continues to shift positively.

Key Market Moves:

• S&P 500 largely unchanged, hovering around 6,400.
• Nasdaq 100 rose 0.3%, Dow Jones Industrial Average fell 0.2%.
• Bloomberg Dollar Spot Index rose 0.7%, euro fell 1.3%.
• Bitcoin declined 0.7% to $117,987.42.
• 10-year Treasury yields advanced two basis points to 4.41%.
• West Texas Intermediate crude rose 1.9% to $66.43 a barrel.

Corporate Highlights:

• Palantir Technologies Inc. shares slipped following reports of the DoD testing AI models from Microsoft and OpenAI.
• Samsung Electronics Co. secured a $16.5 billion pact to produce AI semiconductors for Tesla Inc.
• Texas Instruments Inc. upgraded to outperform by Wolfe Research.
• Cisco Systems Inc. downgraded to inline by Evercore.
• Nike Inc. raised to overweight by JPMorgan Chase & Co.
• PayPal Holdings Inc. to allow businesses to accept over one hundred cryptocurrencies.
• Roche Holding AG plans to test an experimental medicine for Alzheimer’s prevention.
• Arrowhead Pharmaceuticals Inc. expects a $100 million milestone payment from Sarepta Therapeutics Inc.
• EssilorLuxottica SA posted better-than-expected Q2 revenue.
• Warner Bros. Discovery Inc. announced names for its streaming/studios and cable-TV network separation.

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