USD/MXN: Dollar Gains Momentum as Trade Deal Weighs on Peso; Key US Data Looms

The primary driver behind the Dollar’s recent appreciation is the newly forged trade agreement between the U.S. and the EU. The deal, finalized on July 28th, saw the United States and the European Union agree to a 15% tariff on most EU imports, halving the previously threatened 30% rate. In return, the EU committed to increasing purchases of U.S. energy products by $750 billion over three years and investing $600 billion in the U.S. economy. This development was widely interpreted by markets as a significant de-risking event, substantially reducing the perceived probability of a worst-case tariff scenario that had been weighing on global markets. The dollar index rose to 98.67, reflecting renewed investor confidence in the U.S. economy.

However, the agreement has faced criticism from key European leaders. German Chancellor Friedrich Merz warned of significant economic harm to Europe and potential inflationary pressures, while French Prime Minister François Bayrou labeled the accord a “dark day,” accusing the EU of yielding to U.S. demands. These responses contributed to the euro’s depreciation against the dollar, further bolstering the greenback and indirectly contributing to Peso weakness.