The euro climbed in European markets on Thursday against a basket of global currencies, continuing its rebound from a two-week low against the US dollar. The rally was supported by reports of a potential trade agreement between the European Union and the United States.
According to informed European sources speaking to Reuters, the EU may avoid receiving a tariff notice from the US and could secure exemptions from the 10% US base tariff.
Recent key inflation data from Europe have added uncertainty to expectations of a European Central Bank rate cut in July. Markets now await more crucial economic indicators from the eurozone.
The Price
The euro rose 0.25% against the dollar to $1.1749, up from the day’s opening level of $1.1720, after touching a low of $1.1714.
On Wednesday, the euro ended nearly flat against the dollar after hitting a two-week low of $1.1682 the previous day.
US Dollar Weakness
The US Dollar Index fell by more than 0.2% on Thursday, marking its second straight day of losses and pulling back from a two-week high of 97.84. This reflects a continued retreat of the US dollar against major and minor currencies.
Trump’s latest round of tariffs failed to shake markets, with the exception of Brazil, where the threat of a 50% duty sent the Brazilian real down as much as 2.8% overnight.
Market sentiment was also buoyed by the Federal Reserve’s latest meeting minutes, which showed most policymakers believe rate cuts will be appropriate later this year.
Potential Trade Agreement
President Trump and several officials have recently stated that a deal with India is imminent, while the European Union is also moving toward a framework agreement.
According to Reuters, the EU is unlikely to receive a US tariff letter and may be granted exemptions from the 10% base tariff.
European Interest Rate Outlook
Headline CPI in Europe rose 2.0% year-on-year in June, matching market expectations, after a 1.9% increase in May.
Reuters sources indicate that a clear majority at the European Central Bank’s last meeting favored keeping interest rates unchanged in July, with some members calling for an extended pause.
Money market pricing for a 25-basis-point ECB rate cut in July remains steady at around 30%.
Investors are watching for upcoming economic data across the eurozone, as well as further commentary from ECB officials, to reassess the rate cut outlook.
