Japan trade deal done, but USD continues to slip

Yesterday's currency recap

USD continued to retreat as yields continued to fall, sliding down for the 5th consecutive day. GBPUSD and EURUSD both traded through key resistance levels over London trading hours. Jerome Powell was once again the topic of conversation with Scott Bessent stating he sees no reason for the Fed Chair to step down right now and Trump almost conceding to the idea that Powell will have to be out in 8 months anyway.

GBP was lower across the board after UK public borrowing figures came in well above expectations, with June’s deficit hitting £20.7bn — the second highest on record for the month. The print has raised fresh questions over the UK’s fiscal trajectory and added to the broader risk tone weighing on the pound.

Today's GBP rates

What we think

We have another quiet day ahead on the data front, however, one of the most overused words in markets “tariffs” will be the key event after the US and Japan managed to strike a 15% trade deal on goods imported into America. Despite the desired rate being 10%, Japanese equities bounced as it was lower than the threatened 25%.

Whilst this does help reduce uncertainty in yen markets Japan’s PM Ishiba reportedly decided to resign after stating he would hold on to his position until a trade deal was agreed.

Sticking to the theme, Germany and France look to rally member states together and hit back against US tariff threats as the bloc looks to reinforce their stance. Despite trade agreements signed, geopolitical uncertainty stabilised, oil prices returning to levels pre-escalation, the dollar posed a weak come back and has already started to lose some of its ground. Currently the only thing keeping the dollar in the game is resilient US data, and if we start to see a shrinking economy and dipping jobs numbers, we could see the dollar lose further ground.

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