The EUR/USD pair continued its upward momentum on Thursday, rising toward 1.1775 in early European trading. The Euro gained strength against the US Dollar amid growing optimism over a potential trade agreement between the European Union (EU) and the United States (US).
Hopes are rising that both sides may reach a deal that includes a 15% baseline US tariff on EU imports, with possible exemptions. This positive sentiment is offering near-term support to the Euro. Meanwhile, EU negotiators are actively working to prevent the 30% tariff rate threatened by President Donald Trump, which is scheduled to take effect on August 1.
However, the EU has prepared a countermeasure of €93 billion in tariffs if negotiations fail, raising the risk of escalating trade tensions. Any signs of a breakdown in talks could weigh heavily on the Euro and support the US Dollar.
All eyes are now on the European Central Bank (ECB), which is widely expected to hold interest rates steady, keeping the deposit rate at 2.0% in its July meeting. Policymakers are waiting for more clarity on how potential US tariffs might impact inflation across the Eurozone. ECB President Christine Lagarde is expected to strike a balanced tone during her post-meeting press conference, keeping future policy options open. Any unexpectedly hawkish remarks could further boost the Euro.
On the US side, several key economic indicators are due later in the day, including the preliminary July Purchasing Managers’ Index (PMI), weekly Initial Jobless Claims, New Home Sales figures, and the Chicago Fed National Activity Index. These reports may provide further direction for the USD in the near term.
