The US dollar (USD) held firm on Tuesday (July 29th) after posting its strongest daily gain since May, gaining 1.0% on Monday. This rally came after the United States (US) and the European Union (EU) announced the framework for a major trade deal on Sunday.
The market welcomed the news, viewing the agreement as highly beneficial to Washington. Investors are betting that the deal will give the US greater economic and strategic power, boosting confidence in the greenback.
The US Dollar Index (DXY), which measures the greenback against a basket of six major currencies, consolidated Monday's strong gains during European trading hours. Currently, the index is hovering around 98.89, slightly down from its intraday peak of 99.05 reached during Asian trading—its highest level since June 23rd.
The US Dollar Index hit its lowest level in more than three years on July 1st, dropping to 96.38. Since then, the economy has continued to recover and is now on track to post its first monthly increase since February, with a gain of over 2.0% so far this month.
This recovery has been driven by easing trade tensions ahead of the August 1 deadline, with new agreements being reached with key partners such as the European Union and Japan, as well as smaller economies like Indonesia, the Philippines, and Vietnam. Strong US economic data also played a key role, reducing expectations of a Federal Reserve (Fed) interest rate cut on Wednesday and further strengthening the US dollar.
Looking ahead, Tuesday's US economic calendar will be closely watched, featuring the Housing Price Index, Consumer Confidence data, and the JOLTS Job Openings report. The Consumer Confidence Index is expected to improve to a two-month high of 96.0, compared to 93.0 in June.
The June JOLTS survey is expected to show approximately 7.5 million job openings, offering new insights into labor market conditions. This data release could further shape the US dollar's movement ahead of the Fed's monetary policy decision on Wednesday, especially if it continues to demonstrate fundamental strength in the US economy. (alg)
Source: FXstreet
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