US Trade Progress Fuels Currency Gains (07.24.2025)

The Japanese yen extended its winning streak for a fourth day, supported by a new trade agreement with the US and speculation that the BoJ could tighten policy later this year. Meanwhile, gold slipped below $3,390 as demand weakened, while silver stayed firm above $39, supported by falling yields and upcoming US-China trade talks. The British pound also gained ground, approaching 1.3600.

US-EU Trade Optimism Lifts Euro

The euro climbed to $1.1780, nearing its highest level since August 2021, as optimism grew around a potential US-EU trade agreement. Sources suggest the EU is likely to accept a 15% tariff from the US, avoiding a steeper 30% duty that had threatened growth in the eurozone. With inflation still subdued, markets speculate the ECB could maintain a dovish stance despite holding rates steady after eight consecutive cuts. Another 25bps rate cut is priced in later this year. Meanwhile, the Fed is expected to deliver two 25bps cuts before year-end.

Trade Deal and Weak USD Support Yen

The Japanese yen rose for the fourth straight session, reaching its highest level in nearly three weeks around 146.5, supported by a new US-Japan trade deal that eased economic uncertainty. The pact has prompted speculation that the BoJ may consider tightening later this year. Meanwhile, the dollar remained weak near 2.5-week lows. However, soft Japanese manufacturing PMI data and ongoing political instability, including rumors of Prime Minister Ishiba’s resignation, may cap further yen strength. Traders await U.S. flash PMI data for near-term signals.

GBP/USD Extends Gains as UK Outlook Improves

The British pound extended its rally for a third straight session, climbing toward 1.3600 on Wednesday as the dollar fell across the board. Markets are reacting to last-minute trade talks, including a tentative US-Japan deal featuring a 15% reciprocal tariff.

Speculation continues about a potential US-EU deal, though officials remain vague. Meanwhile, the Bank of England may delay bond sales due to poor demand, and traders expect two BoE rate cuts in 2025. PMI data from both the UK and US will be in focus on Thursday.

Trade Progress Keeps Silver Firm

Silver remained firm above $39 per ounce, hovering near its highest level since 2011. A softening dollar and falling Treasury yields continued to support demand for metals. The market also found support in trade headlines: Trump’s new Japan deal introduced a 15% tariff, while China and the US are preparing to meet next week in Stockholm.

Treasury Secretary Bessent signaled progress on a trade truce with China. Meanwhile, Trump escalated pressure on Fed Chair Powell, criticizing his policy stance and suggesting his removal in eight months, further clouding the monetary outlook.