US-Japan trade deal sees the Euro lower

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waterman
Written by Dan Waterman
July 23rd 2025
Reports that the US and China are making good progress are also improving market conditions..

The 'high-beta' Pound Sterling has improved this morning after the US confirms a trade deal with Japan.

'High-beta currencies' such as GBP perform well on positive sentiment and this trade deal reduces global growth uncertainty. It's a big win for both countries (all things being considered under a Trump administration) with Japan 'relieved' to be hit with a 15% tariff rather than 25%.

The US and China are continuing negotiations next week in Stockholm which once hopefully settled, will be the end of the Trump tariff 'era' and markets can move on and the Pound can improve. 

As the Euro is a 'safe-haven' currency, it has fallen on the news and will continue to get fundamentally weaker (just in terms of this particular variable though) as other trade deals get secured.

However, Lloyds Bank have today further downgraded their £-€ forecast to 1.14 near-term, as they expect the Euro to continue grinding down the Pound (as it has done since May). Possible, but it's not what I expect to see happen personally.