US Stocks Up on Trade Hopes; Dollar Down on Rate Cut Bets

The EUR/USD pair climbed to fresh yearly highs of 1.17913 on the iForex platform on Monday, buoyed by broad-based weakness in the US Dollar amid ongoing fiscal policy uncertainty and optimism surrounding trade negotiations led by the Trump administration.

The US Dollar slipped as traders increasingly price in a more accommodative stance from the Federal Reserve. Markets are now expecting over 50 basis points of rate cuts in the coming months, pushing the euro closer to four-year highs against the greenback.

Additional support for the euro came from reports that the European Union (EU) may accept the Trump administration’s proposed universal tariffs. However, the EU is seeking concessions in key sectors, including pharmaceuticals, alcohol, semiconductors, and commercial aircraft, indicating that negotiations remain in flux.

On the data front, German retail sales posted a significant monthly drop of 1.6% in May, well below expectations for a 0.5% increase. Annually, retail activity slowed to 1.6% from 2.3%, missing forecasts of a 3.3% rise. The weak data adds to concerns within the European Central Bank (ECB), where policymakers remain cautious and data-dependent in shaping future monetary policy.

Looking ahead, attention will turn to Tuesday’s high-profile central bank panel featuring Federal Reserve Chair Jerome Powell, ECB President Christine Lagarde, Bank of England Governor Andrew Bailey, and Bank of Japan Governor Kazuo Ueda, which may offer further insight into global monetary policy trajectories.

Despite some headwinds in the eurozone, the broader market landscape—dominated by expectations of US fiscal expansion and Fed rate cuts—continues to support the euro’s ascent against the dollar. All eyes now turn to central bankers and key US data releases for further directional cues.

Gold prices posted modest gains on Monday, supported by continued weakness in the US Dollar (USD) ahead of a data-heavy week in the United States.

The greenback remains under pressure, trading near its lowest levels since February 2022. Market sentiment was further dampened by speculation that President Donald Trump may announce his pick for the next Federal Reserve (Fed) Chair as early as September or October—an announcement that could signal changes in future monetary policy.

While easing geopolitical tensions in the Middle East and expectations of upcoming trade agreements have capped gold’s upside, the broader macroeconomic landscape remains supportive of the precious metal.

Gold also found support from falling US Treasury yields. The 10-year note declined by three basis points to 4.242%, while real yields fell to 1.952%, signaling reduced inflation-adjusted return expectations.

Despite the upcoming July 4 holiday shortening the trading week, markets are expected to remain active, with several key economic indicators on the calendar.

Gold continues to benefit from a mix of declining yields, a weakening dollar, and growing expectations of monetary easing by the Fed. Although improving global trade sentiment may limit safe-haven demand, the overall macro environment remains favorable for bullion—especially if US fiscal risks rise and central banks adopt a more dovish stance in the coming months.

Oil prices edged lower on Monday as easing geopolitical tensions in the Middle East and expectations of a potential OPEC+ production increase weighed on sentiment.

Last week, both Brent and West Texas Intermediate (WTI) crude benchmarks recorded their sharpest weekly declines since March 2023.

Earlier this month, crude prices had surged above $80 per barrel following a 12-day conflict that began on June 13, when Israel launched strikes on Iran’s nuclear facilities. However, prices have since retreated as ceasefire efforts gained traction.

Adding to the downward pressure, U.S. crude oil production hit a new monthly record of 13.47 million barrels per day (bpd) in April, up slightly from 13.45 million bpd in March, according to the U.S. Energy Information Administration’s latest Petroleum Supply Monthly report.

According to four sources cited by Reuters, OPEC+ is expected to increase output by 411,000 bpd in August, following similar increments in May, June, and July. If confirmed, this would bring the group's total supply hike for the year to 1.78 million bpd—roughly 1.5% of global demand. Despite the expected rise in output, analysts note that market tightness persists.

U.S. equities extended their rally on Monday, with the US 500 and US Tech 100 closing at new all-time highs, capping off their strongest quarterly performance in over a year. Investor optimism was fueled by progress in global trade talks and growing expectations for interest rate cuts by the Federal Reserve.

Despite the impressive quarterly gains, the first half of 2025 marked the weakest for the major U.S. indices since 2022, as prolonged trade uncertainty weighed on sentiment. Market jitters intensified following President Donald Trump’s sweeping tariff announcement on April 2.

However, recent developments—including trade progress with China and the UK—have bolstered investor confidence. Hopes are high that additional agreements could be finalized ahead of Trump's self-imposed July 9 trade deadline.

Adding to the positive sentiment, Canada scrapped its planned digital services tax on U.S. technology firms just hours before it was set to take effect, in a bid to move forward stalled trade negotiations with Washington.

Meanwhile, Senate Republicans are pushing to pass Trump’s expansive tax and spending proposal—dubbed the "One Big Beautiful Bill"—before the July 4 holiday. The legislation, which carries a projected $3.3 trillion impact on the national debt, has sparked debate within the GOP.

Investors are also eyeing key economic data this week, including the June nonfarm payrolls report and ISM manufacturing and services PMIs. A string of soft data releases, combined with speculation that Trump may replace Fed Chair Jerome Powell with a more dovish candidate, has fueled expectations for rate cuts later this year.