The U.S. dollar rallied sharply against major currencies on Monday following news of a trade deal between President Donald Trump and European Commission President Ursula von der Leyen, which eased fears of a full-blown trade war. The agreement slashed proposed tariffs on EU imports from 30% to 15%, bringing relief to investors and triggering a broader shift in global currency sentiment.

The euro, which initially jumped in Asia trading, reversed course and fell 0.81% to $1.1642—its biggest one-day drop since May. Analysts suggested the turnaround reflected a belief that the deal was heavily skewed in favor of the U.S., restoring investor appetite for dollar-denominated assets. As Macquarie’s FX strategist Thierry Wizman put it, “This isn’t a divorce—it’s marriage counseling. The U.S. is re-engaging with its allies.”

The dollar also gained against the yen and Swiss franc, while the pound dropped 0.24% to $1.3422. The greenback’s momentum came despite expectations that the Federal Reserve and Bank of Japan will keep interest rates steady this week, highlighting that trade dynamics—not yields—are steering currency moves for now.

Investors are also watching for updates from ongoing U.S.-China negotiations, where officials are attempting to extend a tariff truce beyond the August 12 deadline. Meanwhile, earnings from U.S. tech giants—Apple, Amazon, Microsoft, and Meta—are expected to impact market flows, potentially pushing even more capital into U.S. assets if results impress.

For now, the market seems to be breathing a sigh of relief that the feared escalation of trade tensions has been avoided. Whether the dollar’s strength will hold depends on upcoming central bank guidance and the outcome of delicate negotiations with China. But one thing’s clear: the U.S. has reclaimed some of its bullish momentum—at least for now.