With another major trade deal signed, can the US dollar get out of its funk?
A long-awaited trade deal with the EU just gave the greenback a lift — but it's a long way back to where it was in January.
Two economic heavyweights, which together account for nearly a third of global trade, finally reached a hard-won agreement yesterday — bringing some relief to the market and, perhaps, to the embattled US dollar.
Starting August 1, a 15% tariff will be applied to most EU exports to the US, including cars, pharmaceuticals, and semiconductors — much less severe than the 30% rate President Trump threatened just weeks ago, though some sector-specific details remain unclear.
With the deal assuaging most investors’ lingering trade concerns, S&P 500 futures ascended to record highs again in early trading, while European stocks gained ~1%. What also ticked up on the news was the beleaguered US dollar, which is coming off the back of its worst first-half performance in more than 50 years.
Dragged down by the “t” word, concerns over the fiscal deficit, and uncertainty over the Fed’s policy direction, the greenback lost ground against almost every major currency this year. Most notably, it dropped a staggering 11% against both the peso and the euro.
Following Sunday’s breakthrough, though, the dollar is showing signs of recovery — gaining 0.7% against the euro and 0.5% against the yen. That rebound could continue, if the pace of last week’s trade deals with Japan, Indonesia, the Philippines, and now the EU, is repeated.
So, who wins from a weaker dollar? Well, your trip to Europe would be more expensive as an American, but your stock portfolio might weirdly benefit — especially in the short term, as a large proportion of America’s largest public companies make their money overseas. Once that revenue is converted into dollars... number go up. Especially for Big Tech.
