EUR/USD extends the rally above 1.1750 ahead of ECB rate decision

• EUR/USD gathers strength to near 1.1775 in Thursday’s early European session. 

• EU and US move closer to a trade deal as the tariff deadline looms. 

• The ECB is anticipated to leave interest rates unchanged for the first time in more than a year. 

The EUR/USD pair extends its upside to around 1.1775 during the early European session on Thursday. The Euro (EUR) edges higher against the US Dollar (USD) amid hope for the European Union (EU) and the United States (US) trade deal. All eyes will be on the European Central Bank (ECB) later on Thursday, with no change in rate expected. 

The EU and the US are moving toward a trade agreement that could include a 15% US baseline tariff on EU goods and possible exemptions. Optimism surrounding the trade deal provides some support to the shared currency. European trade negotiators were trying to negotiate a deal to avoid the 30% tariff rate that Trump has announced he would slap on imports from the EU on August 1.

Nonetheless, the bloc plans 93 billion euros in counter-tariffs if no deal is reached, which might escalate trade tensions. Any signs of negative developments surrounding US-EU trade talks could exert some selling pressure on the EUR against the USD. 

The ECB is expected to leave the deposit rate unchanged at 2.0% at its July meeting on Thursday as policymakers await clarity on what US President Donald Trump’s tariffs will do to inflation. ECB President Christine Lagarde is likely to keep all options on the table during the press conference. Any hawkish comments from ECB policymakers could underpin the EUR in the near term. 

Later on Thursday, the preliminary reading of US Purchasing Managers Index (PMI) data for July will be in the spotlight. Also, the weekly US Initial Jobless Claims, New Home Sales, and the Chicago Fed National Activity Index will be released later on the same day.