Forex Today: Mood improves as US reaches trade deal with Japan
Here is what you need to know on Wednesday, July 23:
There is a positive shift in risk sentiment midweek as investors cheer news of the United States (US) and Japan reaching a trade deal. Later in the session, preliminary July Consumer Confidence data from the Eurozone and June Existing Home Sales data from the US will be featured in the economic calendar.
US Dollar PRICE This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the weakest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.94% | -0.91% | -0.84% | -0.91% | -0.94% | -0.98% | -1.19% | |
| EUR | 0.94% | 0.09% | 0.12% | 0.00% | -0.05% | -0.23% | -0.29% | |
| GBP | 0.91% | -0.09% | -0.20% | -0.03% | -0.11% | -0.10% | -0.19% | |
| JPY | 0.84% | -0.12% | 0.20% | -0.06% | -0.06% | -0.19% | -0.18% | |
| CAD | 0.91% | -0.01% | 0.03% | 0.06% | 0.03% | -0.08% | -0.33% | |
| AUD | 0.94% | 0.05% | 0.11% | 0.06% | -0.03% | -0.10% | -0.11% | |
| NZD | 0.98% | 0.23% | 0.10% | 0.19% | 0.08% | 0.10% | -0.09% | |
| CHF | 1.19% | 0.29% | 0.19% | 0.18% | 0.33% | 0.11% | 0.09% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
US President Donald Trump announced early Wednesday that he completed a "massive deal" with Japan, explaining that Japan will invest $550 billion into the US and pay 15% reciprocal tariffs, down from 25%, to the US. Meanwhile, Japanese Prime Minister Shigeru Ishiba noted that they will continue working closely with the US and said that they will raise the portion of rice imports from the US without sacrificing Japanese agriculture. Japan's Nikkei 225 Index rose more than 3.5% and reached its highest level since July 2024 following this development, led by impressive gains seen in automakers. Reflecting the improving market mood, US stock index futures were last seen rising between 0.2% and 0.3%. Finally, USD/JPY fluctuates in a tight channel above 146.50.
The US Dollar (USD) Index lost about 0.4% on Tuesday but managed to find a foothold early Wednesday. The index moves sideways slightly below 97.50 in the early European session.
Canadian Prime Minister Mark Carney noted late Tuesday that while the Canadian government is still open to further trade discussions with the US, Canada will be pursuing active negotiations with allies outside of the US. After losing more than 0.5% on Tuesday, USD/CAD continues to stretch lower and trades below 1.3600 in the European morning.
EUR/USD corrects lower and trades below 1.1750 after posting gains for three consecutive days. The European Central Bank (ECB) will announce monetary policy decisions on Thursday.
GBP/USD stays in a consolidation phase above 1.3500 following a two-day rebound.
Gold preserved its bullish momentum following Monday's rally and climbed to a fresh monthly high above $3,430 on Tuesday. XAU/USD corrects lower early Wednesday but holds comfortably above $3,400.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
