EUR/USD extends losses, US Dollar appreciates following the EU-US trade deal
- The Euro accelerates its decline on Monday as investors analyze the details of the EU-US trade deal.
- Eurozone products face a 15% tariff in exchange for strong EU investment and large purchases of energy and military equipment from the US.
- The US Dollar maintains a moderate positive tone as US data backs the Fed's hawkish stance.
It was buy the rumour, sell the fact for the EUR/USD pair, which opened the week in the same defensive mode that closed the previous one. News that the European Union (EU) finally signed a trade agreement with the United States (US) has failed to provide any significant support to the Euro (EUR), while the US Dollar (USD) extends its recovery against a basket of major currencies.
The common currency appreciated moderately at the market opening, but bulls were capped at 1.1770 before pulling back below 1.1750 and approaching the 1.1740 area in the early European session on Monday. The broader trend remains positive, from mid-July lows at 1.1555, but the pair is showing a waning bullish momentum.
The European Commission President Ursula von der Leyen signed a pact with the US President Donald Trump, which will reduce tariffs on European products to 15%, half of the 30% rate announced by Trump earlier in July. In exchange, the Eurozone has committed to invest EUR 600 billion in the US and ramp up purchases of Gas and military equipment.
The deal has been unable to alter the recent balance of power between the Euro and the US Dollar, with the latest supported by relatively upbeat US data, which backs the Federal Reserve's (Fed) "wait and see" stance and practically discards any interest rate change after this week's monetary policy decision.
The economic calendar is thin today, with only the Dallas Fed Manufacturing Business Index providing some fundamental guidance during the US session. Investors are likely to remain calm ahead of a busier second half of the week, with Wednesday's Federal Reserve decision and Friday's Nonfarm Payrolls (NFP) report for July attracting the focus.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.30% | 0.02% | 0.09% | -0.01% | 0.35% | 0.21% | -0.19% | |
| EUR | -0.30% | -0.30% | -0.19% | -0.30% | 0.05% | -0.09% | -0.49% | |
| GBP | -0.02% | 0.30% | -0.08% | -0.00% | 0.35% | 0.21% | -0.18% | |
| JPY | -0.09% | 0.19% | 0.08% | -0.07% | 0.23% | 0.12% | -0.12% | |
| CAD | 0.00% | 0.30% | 0.00% | 0.07% | 0.33% | 0.21% | -0.18% | |
| AUD | -0.35% | -0.05% | -0.35% | -0.23% | -0.33% | -0.14% | -0.54% | |
| NZD | -0.21% | 0.09% | -0.21% | -0.12% | -0.21% | 0.14% | -0.39% | |
| CHF | 0.19% | 0.49% | 0.18% | 0.12% | 0.18% | 0.54% | 0.39% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Daily digest market movers: The EU-US trade deal fails to convince markets
- According to EC President von der Leyen, it was "the best deal we could get", yet probably not the best deal investors were hoping for. The European Union will face 15% levies, which is not 30%, but neither the original zero-for-zero deal aimed at by Brussels. The 15% tariffs extend to pharmaceutical products and automobiles, the Eurozone's main exports to the US. In exchange, Europe will have to invest EUR 600 billion in the US and buy EUR 750 billion of its Gas. The Euro reacted negatively as markets analysed the small letter in the pact.
- The US Dollar maintains a moderately bid tone from last week. Data released on Friday revealed that US Durable Goods Orders contracted by 9.3%, their worst performance in years, but still better than the 10.8% drop forecasted by market analysts. Beyond that, excluding transportation, the so-called "core Durable Goods" increased at a 0.2% rate, beyond the 0.1% expected.
- These figures come after an unexpected decline in the weekly US Initial Jobless Claims released on the previous day. Claims for unemployment benefits fell for the sixth consecutive week, reaching their lowest levels in the last three months, highlighting the resilience of the labour market and providing further leeway for the Federal Reserve to keep interest rates higher for longer.
- The Fed's Monetary Policy Committee meets on Tuesday and Wednesday, and is widely expected to leave its benchmark Funds Rate unchanged at the current 4.25%-4.50% range. The main attraction of the event will be Fed Chairman Jerome Powell's press release to see whether the latest trade deals and potential rebound in US GDP, which will be released earlier on the same day, can alter the bank's cautious stance on further rate cuts.
EUR/USD is under growing bearish pressure, approaching 1.1700
EUR/USD is showing a growing bearish momentum. The pair was rejected at 1.1770 during Monday's Asian session and has depreciated about 0.3% since, forming a potential Head & Shoulders (H&S) pattern, a figure that often anticipates trend shifts, whose neckline is at the 1.1700-1.1710 area.
Technical indicators are pointing lower. The 4-hour Relative Strength Index (RSI) is dipping into negative territory below 50, and the MACD in the same timeframe reflects a waning bullish momentum.
The mentioned 1.1700-1.1710 area (July 25, 23 lows respectively) is the bottom of last week's trading range. Below here, the H&S pattern would be activated. The next support levels would be the July 22 low at 1.1680. The H&S´s measured target would be the July 18 and 21 lows, at 1.1617.
On the upside, the intraday high at 1.1770 and the July 24 high at 1.1790 are likely to challenge bulls ahead of the multi-year high at 1.1830.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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