More than half of US foreign trade is duty-free. Furthermore, switching to American products supports the economy. Let’s discuss this topic and make a trading plan for the EURUSD pair.
The article covers the following subjects:
Major Takeaways
- The euro is rising on hopes for peace in Ukraine.
- The Fed is changing its outlook and preparing to cut rates.
- Real US tariffs are lower than those in the agreements.
- Long trades on the EURUSD pair opened at 1.155 and 1.165 can be increased.
Weekly US Dollar Fundamental Forecast
US inflation is not accelerating because companies are covering most of the import duties. Tariffs turned out to be much lower than expected in trade agreements. Europe has adapted to higher gas prices since the onset of the Ukraine conflict, and the prospect of its end is encouraging for the euro. These factors are enabling the EURUSD exchange rate to increase. However, this growth appears fragile.
A summit between the US and Russian presidents in Alaska has raised hopes for a ceasefire in Ukraine. Despite Donald Trump’s statement that no deal was reached, the euro rose. The price takes everything into account. Markets are often right about future events. Nevertheless, the chances of Kiev surrendering its territories and achieving a truce seem low.
Chances for Peaceful Settlement of Ukraine Conflict
Source: Bloomberg.
According to Barclays’s research, the weighted average tariff rate in the US in June was 9%, lower than the estimated 12% after Washington’s trade agreements. Notably, 52% of US imports were duty-free thanks to numerous exemptions. Meanwhile, consumers and companies in the United States purchased more goods from countries with low tariffs or switched to American equivalents.
Barclays believes the key to the resilience of the US economy lies in the lower actual import duties. Meanwhile, the cooling labor market and stable consumer prices give the Fed the opportunity to resume its cycle of monetary expansion in September. The futures market put the likelihood of this outcome at 85%.
Jerome Powell is expected to announce the Fed’s change of heart first in Jackson Hole. Before the central bankers’ meetings, the minutes from the July FOMC meeting will be published. At that time, officials were unaware of the weak employment figures and confident that the pause should be extended. The contrast is clear, and the Fed chair’s speech in Wyoming could cause Treasury yields and the dollar to plummet, as they did in 2024.
Hole Impact on US Bond Market
Source: Bloomberg.
Impressive retail sales statistics in the US could reinforce doubts among FOMC officials about lowering rates at the next meeting. However, the rally of the EURUSD pair suggests otherwise. Forex is confident that the Fed will resume its cycle of monetary policy easing, despite the strong economy.
Donald Trump’s growing authority plays a significant role. The US president has scored another victory in the bond market. Foreign holders increased their Treasury holdings by $508.1 billion in the first half of the year. In this context, what kind of capital flight can we talk about?
Weekly EURUSD Trading Plan
Expectations of a Fed rate cut in September and hopes for peace in Ukraine are pushing the EURUSD pair higher. Against this backdrop, long positions formed at 1.155 and 1.165 can be increased.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
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