DAX muted with trade developments in focus. GBP/USD rises on US Dollar weakness.

DAX Muted With Trade Developments in Focus

• The EU was absent from Trump’s latest list of tariffs
• German exports fell amid weak US demand
• DAX has extended its recovery above 24k

The DAX is trading little changed above 24,000 on Tuesday as markets remained focused on ongoing trade negotiations between the US and its main partners.

Trump notified Japan and South Korea, along with twelve other nations, of tariffs that will start on August 1st and will be at least 25% unless there are swift negotiations for a new trade agreement.

Canada, Mexico, the European Union, and China are all absent from this list, which could reflect a more advanced state of trade negotiations for these partners.

Whilst the resetting of the July 9 deadline to secure trade deals to August 1st, which is still not even a firm deadline, has brought some optimism, this is being countered by ongoing uncertainty surrounding the situation.

On the data front, German exports fell by more than expected in May as US demand decreased for a second straight month following strong purchases earlier in the year in anticipation of US tariffs.

DAX Forecast – Technical Analysis

The DAX has extended its recovery from the 23,000 low, rising above the 24,000 resistance. Buyers supported by the RSI over 50 will look to extend gains towards 24,500 and fresh record highs.

Support can be seen at 23,700 the confluence of the 50 and 20 SMA. Below here, 23,300 comes into play, the March high. A break below 23k is needed to create a lower low.

GBP/USD Rises on USD Weakness

• Uncertainty surrounding tariffs keeps USD weak
• UK gains could be limited owing to domestic fiscal issues
• GBP/USD trades in a rising channel

GBP/USD is rising towards 1.3650 amid weakness in the U.S. dollar as traders digest President Trump’s latest announcement regarding tariff rates.

President Trump sent letters to 14 countries dictating tariff rates for nations that have failed to agree on a trade deal with Washington, within the 90-day tariff extension period. Notably, the US imposed a 25% tariff on imports from Japan, despite the two countries having been actively negotiating in recent weeks. These new tariffs are set to start on August 1st, although Trump said this is not a firm deadline.

Uncertainty surrounding Trump’s tariff policy is expected to keep the US dollar on the back foot. Markets are struggling to price in the impact of tariff policies.

Meanwhile, the pound is pushing higher and risk-on sentiment; however, gains could be limited given the mounting fiscal risks in the UK.

Last week, amendments to the welfare bill meant more government spending, wiping out the Chancellor’s fiscal headroom. Chancellor Rachel Reeves confirmed that the government will fund the additional financial burden, although she has not ruled out tax increases.

Tax hikes slow growth and are considered to be deflationary, meaning the Bank of England may need to cut interest rates more aggressively at the end of the year or heading into 2026.

Currently, the markets are pricing and are increasingly confident that the BoE will cut rates by 25 basis points in the August meeting.

UK GDP data is due on Friday and is expected to show the economy grew 0.1% in May after declining 0.3% in April.

GBP/USD Forecast – Technical Analysis

The GBP/USD trades within a rising channel, encountering resistance at 1.3790 before easing lower. The pair is testing the rising trendline support and the 20 SMA around 1.36.

Should the support hold, buyers will look to extend gains towards 1.37 and on to 1.38, a level last seen in 2021.

Should sellers break below the 1.36 support, this opens the door to the 1.3450 support zone, a break below here could see sellers gain traction.

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