Trade Agreement Eases Worries, Euro Holds Steady against US Dollar
Huitong Finance APP News — The euro fell slightly against the US dollar over the past two trading days before recovering, and stabilized at around 1.1752 on Monday (July 28), with a gain of about 0.1%, overall volatility relatively flat. The euro gained support due to the trade agreement between the United States and the European Union over the weekend, easing concerns over broader trade conflicts.
According to Bloomberg, the two economies reached a framework trade agreement on Sunday, imposing a 15% tariff on most European goods, which will take effect on August 1 and bring an end to several months of stalemate.
Epperstone senior market strategist Michael Brown said that the US-EU trade deal announced by Trump is expected to boost risk appetite in the market. He noted that "this agreement not only eliminates a key tail-risk concern previously weighing on markets but also further demonstrates the current trend shift from intense rhetoric to substantive trade cooperation." As for the impact of this agreement on the current financial market, Brown believes that the euro exchange rate may strengthen significantly.
The agreement is seen as an important step in avoiding a global trade war. Trump revealed that the EU plans to invest around $6 trillion in the US and increase energy and military equipment purchases. Earlier, the US and Japan reached a similar agreement, with Japan committing to invest $5.5 trillion, while the US imposes a 15% auto tariff on Japan. However, some European individuals still express disappointment over the "zero-tariff" target being higher than expected.
European Commission President Ursula von der Leyen said on Sunday that the EU agrees not to impose retaliatory tariffs and will invest an additional $6 trillion in the US based on existing spending.
The European Central Bank maintained its interest rate unchanged last week and emphasized that inflation is proceeding at its previously expected pace. The ECB emphasizes that it needs more data on economic development before further clarifying its policy outlook.
Traders expect the Federal Reserve to keep the benchmark interest rate steady at 4.25% to 4.50% at its July meeting on Wednesday. The market will closely follow the news release from the Federal Open Market Committee (FOMC) to look for any signs of a possible rate cut in September. According to the Chicago Mercantile Exchange's Fed observation tool, market participants currently expect a probability of around 62% that the Fed will cut rates in September, reflecting the widespread consensus and its impact on financial asset prices, which may weaken the euro exchange rate against the US dollar.
Beijing Time 11:30, the euro-dollar spot price is reported at around 1.1752/53.