Markets have taken the news of a US-EU trade deal positively. The deal is largely as rumoured in the middle of last week and seems to follow a template of 15% baseline tariffs and a commitment to spending big on US goods and energy. The deal is better than the 30-50% tariff rates threatened over the last couple of months, although it is probably as bad as the universal tariff rates being discussed late last year, ING's FX analyst Chris Turner notes.

Markets are pricing in a quiet August

"We still do not know what is going to happen to the pharmaceutical sector, where the results of a trade investigation may well be released later this week. In terms of big trade deals yet to be secured, the market will still be on the lookout for deals with Asia (South Korea, Taiwan, India) and perhaps anything new for Mexico and Canada, too. European politicians will be hoping that this deal can bring some certainty to businesses and unlock much-needed investment. Investment intentions in PMI surveys will therefore be heavily scrutinised over the coming months."

"Given that a deal close to this one was heavily rumoured last week, it may be no surprise then that FX markets have not done much overnight. However, there is a huge amount of macro data and central bank action this week, which we think can provide some support to the dollar. The US macro data includes jobs data (JOLTS Tuesday, NFP Friday), a likely bounce back in second quarter GDP on Wednesday and stickier inflation on Thursday (June core PCE), which should tick back up to 0.3% month-on-month. This should leave the majority of the Federal Reserve comfortable in their patient position on interest rates (FOMC meeting on Wednesday) and see a further pricing out of the prospects of a September Fed rate cut."

"Once this week's data calendar is clear, it looks as though markets are pricing a quiet August. This should add interest to the carry trade, where one-week rates at 4.37% per annum do not make the dollar an ideal funding currency. We continue to favour a period of consolidation for the dollar, where the DXY can grind back towards the 98.50/99.00 area, assuming the US data obliges."