The trade accord was struck following final negotiations between Trump and senior Japanese negotiators in the White House on Tuesday. Official White House Photo by Abe McNatt.
The Euro is one of the main losers of the new accord.
Pound Sterling is rising in the slipstream of news that Japan and the U.S. have struck a new trade accord that will settle new U.S. imports on Japanese goods at 15%, much to the relief of Japanese businesses that feared failure to secure a deal would result in a 25% rate.
Crucially, Japanese car exports to the U.S. will also be tariffed at this rate.
Japanese stocks have soared in response, raising Asian markets and the rest of the world is following; a melt-up to new record highs is likely for a slew of European and U.S. stock indices.
"The main conclusion of the trade deal between the U.S. and Japan is that it removes uncertainty and therefore is a positive step for the global economy," says Kenneth Broux, a strategist at Société Générale.
"Reports that the U.S. and China are also making good progress, another round of negotiations is planned in Stockholm next week, would be another fillip for global growth and risk sentiment including equities, commodities and higher beta currencies," he adds.
A 'high beta' currency is one that responds to developments in equity markets, tending to rise in response to positive impulses in direction.
The trade assists the Pound higher against some of the 'safer' FX names, such as the Franc and Yen, while weighing it down against the commodity Dollars of Australia and New Zealand, as well as Emerging Market peers.
Above: GBP/EUR rises to new highs, signifying investor positivity.
2025's trade tensions have been particularly good for the euro, which has gained against the majority of the major currencies as investors adjust portfolio and hedge ratios in response to U.S. President Donald Trump's efforts to realign the global order.
We're entering the final stages of the big tariff adjustment, and this naturally weighs on the winners from the turmoil, including Europe's single currency. It's allowing GBP/EUR to further steady itself following a multi-week selloff.
It's too soon to call the end of that sell-off, but in the near term, some further stabilisation and recovery is possible if the broader backdrop remains constructive.
Above: GBP/EUR is still pointed lower, says a new technical analysis from Lloyds Bank.
"This trade agreement has changed the mood as we move to the middle of the week. Financial assets had been directionless at the start of the week, as investors waited for some key earnings reports later today and news on trade deals. The Japan/ US trade agreement has boosted stocks across the world," says Kathleen Brooks, research director at XTB.
Key risks to the outlook would be a failure of Europe and the U.S. to reach an accord ahead of the August 01 deadline, although the Japanese deal provides a clear contour for future deals to be reached. And even if the August 01 deadline is missed, Trump has shown himself willing to push back deadlines in order to reach a deal.
The U.S. also reached a new trade agreement with the Philippines on Tuesday, and U.S. Treasury Secretary Scott Bessent said that talks with China were to resume next week.
"We continue to think that tariff news will have the broadest impact across financial markets in the coming days," says Brooks.