The euro rose in the European market on Monday at the start of the week’s trading against a basket of global currencies, resuming its gains that had stalled for two days against the US dollar, and once again approaching a two-week high, supported by the trade agreement between the European Union and the United States.
Following a hawkish meeting by the European Central Bank last week, expectations for a rate cut in September have declined. To reprice those expectations, investors are now awaiting the release of several key economic indicators from Europe — especially July inflation data.
The Price
• EUR/USD today: The euro rose against the dollar by 0.25% to $1.1770, up from Friday’s closing price of $1.1741, and recorded the lowest level during today’s session at $1.1748.
• On Friday, the euro ended the session down by less than 0.1% against the dollar, marking a second consecutive daily loss due to continued correction and profit-taking from the two-week high at $1.1775.
• Last week, the euro gained 1.0% against the dollar, posting its first weekly gain in the past three weeks, supported by the European Central Bank’s monetary policy meeting.
Trade Agreement Between the EU and the US
During their meeting in Scotland on Sunday, US President Donald Trump and European Commission President Ursula von der Leyen announced a new trade deal that includes the following:
• The agreement imposes US tariffs on imports from Europe — including cars, pharmaceuticals, and semiconductors — at a rate of 15% starting August 1.
• A selected group of American goods will be fully exempt from European tariffs under a “no-reciprocity” framework, including: aircraft parts, semiconductor equipment, some generic pharmaceuticals, chemicals, and strategic agricultural products.
• Tariffs on steel and aluminum will remain at 50% for now, with both sides agreeing on the potential to replace them later with a quota system.
• The EU committed to injecting up to $600 billion in investments into the US economy during Trump’s second term.
• The EU also committed to purchasing about $750 billion in US energy products — including liquefied natural gas and nuclear coal — over three years.
• Trump stated that the agreement aims to reduce the US trade deficit with the EU, which reached $235.6 billion in 2024.
• Von der Leyen described the deal as providing “stability and predictability” for both sides, with a focus on “rebalancing” the trade relationship.
European Interest Rates
• Last week, the European Central Bank kept its main interest rates unchanged at 2.15% — the lowest level since October 2022 — after having cut rates in the previous meeting for the seventh time in a row.
• The ECB preferred to pause its monetary easing in anticipation of clarity regarding future US trade relations.
• ECB President Christine Lagarde said after the monetary policy meeting: “We are in a waiting mode.” She added that the eurozone economy has shown resilience despite global economic uncertainty.
• According to Reuters sources, a clear majority in the ECB meeting expressed preference for keeping interest rates unchanged in September, marking a second consecutive meeting with this stance.
• Money market pricing for a 25-basis-point ECB rate cut in September has declined from 50% to below 30%.
• To reprice those expectations, investors in the coming period will closely monitor various economic indicators from Europe, in addition to statements by ECB officials.
