The U.S. administration presents the UK deal as a model — but in reality, it’s far from exemplary. Yet markets keep believing the White House’s narrative and buying the U.S. dollar. Let’s discuss it and make a trading plan for EUR/USD.
The article covers the following subjects:
Major Takeaways
- The U.S. and the UK struck a trade deal.
- Investors are betting on lower tariffs.
- The derivatives market is scaling back Fed rate cut expectations.
- A EUR/USD rebound from $1.117 will be a reason to shift from shorts to longs.
Weekly Fundamental Forecast for Dollar
The White House is overplaying its hand. It’s now clear that Washington’s main plan was to shock markets with high tariff announcements, then swiftly negotiate deals before those tariffs begin to ruin the U.S. economy. But China and Canada aren’t rushing to bow to the U.S. Europe threatens retaliatory duties if talks fail, and Japan hints at selling treasuries. The only option left is to rush a supposedly blockbuster deal.
If anyone deserved a good deal, it was the UK. The U.S. has a trade surplus with Britain, and its leader, Keir Starmer, is on good terms with Donald Trump. But in reality, the UK got a raw deal. Its exports will face a 10% tariff, up from 2.4%, while U.S. farmers gain open access to Britain’s agricultural market.
U.S. Foreign Trade with Other Countries
Source: Wall Street Journal.
U.S. Trade Representative Jamieson Greer called the Washington-London agreement a benchmark for others to follow. ING disagrees. The UK is one of the few with a neutral trade stance with the U.S.; others are in a much worse position. Trump himself echoes this, saying the UK got a good deal, but other countries with large trade surpluses and insufficient “respect” for America will face higher final tariffs.
Capital Economics notes that the White House’s rush to showcase deal progress, especially ahead of key China talks, appears desperate.
Yet markets see what they want to see. Greed reigns, so news of the UK deal sparked a U.S. stock index rally, allowing EUR/USD bears to push prices below the lower consolidation range boundary of $1.128–$1.138.
If tariffs end up lower, the U.S. economy might avoid a recession. The Fed would have less reason to cut rates aggressively, supporting the dollar. Indeed, following the announcement of the Washington–London deal, the odds of three monetary expansion moves in 2025 dropped from 75% to 58%, while the chances of two rose from 20% to 30%, and the probability of just one doubled to 11%.
Market Expectations for Fed Rates
Source: Wall Street Journal.
Weekly Trading Plan for EUR/USD
A EUR/USD correction was overdue, but the White House’s haste suggests not everything is under control. The pair’s fate depends on testing support at $1.117. A breakdown would justify building up shorts opened at $1.1325, while a rebound would signal a reversal and a return to longs.
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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