Dollar Watch: Russia Sanctions in the Spotlight.

  • Russia Sanctions in Focus: New US sanctions targeting Russian oil buyers could push energy prices up, strengthening the USD and hurting energy-importing regions.

  • Trade Tensions Simmer: Proposed US tariffs on the EU and Mexico have had limited market impact so far, seen more as a negotiating ploy than policy certainty.

  • US Inflation Returns: June CPI data (out Tuesday) is expected to rise slightly — possibly reducing expectations for Fed rate cuts and lifting the dollar.

  • Euro Under Pressure: Trade headwinds, ECB cut expectations, and energy risks could drag EUR/USD toward the 1.1450–1.1500 zone.

  • Sterling Weakens: Poor UK jobs data and cooling services inflation may accelerate BoE rate cuts, with EUR/GBP poised to push higher.

USD: Markets Eye Russia Sanctions as Dollar Holds Firm

Markets have brushed off weekend threats from Washington about potential 30% import tariffs on the EU and Mexico. US and German equity futures dipped only slightly, by 0.4% and 0.6% respectively, and the dollar edged up. Investors view these tariff threats more as a hardball tactic in negotiations rather than imminent policy moves. Our base case remains that more favourable trade deals will be struck before the August 1 deadline, avoiding any rerun of April’s tariff-induced volatility.

The bigger focus today could be new US sanctions on Russia. Growing frustration from President Trump towards President Putin has led to a policy shift — including sending Patriot missile systems to Ukraine. Markets will watch for potential secondary sanctions on countries buying Russian oil, with India seen as particularly exposed. Speculation about massive 500% tariffs on those aiding Russia is circulating. If sanctions meaningfully disrupt Russian oil or gas flows, expect energy prices to rise — which could benefit the energy-independent US (boosting the dollar) and weigh on Europe and Asia, major energy importers.

Meanwhile, macro data also plays a role this week. June US CPI is out tomorrow, expected to climb 0.3% month-on-month. While July-September data may reflect tariff impacts more clearly, any surprise in tomorrow’s reading could start to erase the 17bp of rate cuts priced in for the September FOMC meeting — offering further support to the dollar.

If energy prices jump on Russia news, DXY (the dollar index) could close the gap back to 98.35.

EUR: Choppy Waters as Trade and Energy Risks Rise

EUR/USD remains vulnerable, and those waiting to buy euros might soon get more attractive levels. With US-EU trade tensions heating up and expectations of a 10% tariff rate on EU goods under pressure, plus the potential for higher US rates and rising energy prices, the euro could face additional downside. A break below 1.1650 in EUR/USD could pave the way to the 1.1450/1500 zone.

Today, attention turns to the EU’s bond issuance. Last week’s strong demand (14x and 20x oversubscriptions) continues with a fresh €5bn in new bonds being offered. Settlement day for last week’s issuance is tomorrow, which might provide some euro support regardless of CPI data from the US.

The eurozone data calendar is quiet, and few ECB speakers are scheduled. However, markets are still underpricing our expectation of a 25bp ECB rate cut in September, currently priced at only 40%. That leaves room for further euro softness.

GBP: Sterling Slips Amid Budget and Jobs Concerns

Sterling continues to lag behind its peers, with investors growing more concerned about the UK’s constrained fiscal outlook under Chancellor Rachel Reeves. But this week, macro data could take centre stage — especially regarding the labour market. A weak employment report from KPMG has already set a negative tone, and Thursday brings official June labour market figures. May’s drop of 109k in payrolled employees is expected to be revised up — if not, the case grows for a softer jobs market and earlier BoE rate cuts.

CPI data for June is also due tomorrow, where services inflation is expected to dip again — a further signal supporting rate cuts. Currently, markets are pricing in two 25bp cuts from the Bank of England by year-end.

On the currency front, EUR/GBP has found solid support at 0.8600. A break above 0.8670 could open the door to a test of the April high at 0.8735.

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.