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The Euro pulls back from three-week highs, though the bullish momentum remains supported by optimism over a potential EU-US trade deal.
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Reports suggest the deal could feature 15% baseline tariffs on EU exports.
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While the ECB is widely expected to keep rates unchanged, it may signal possible easing in the future.
The EUR/USD pair is paring earlier gains on Thursday after climbing on reports suggesting the European Union (EU) and the United States (US) may be nearing a trade agreement. Despite upbeat preliminary Eurozone PMIs, the Euro is under pressure as investors unwind long positions ahead of the European Central Bank (ECB) policy decision.
In the European morning session, the Euro (EUR) trades at 1.1750, easing from a three-week high of 1.1780 reached following news of a potential EU-US trade deal. Still, the pair holds its short-term bullish bias, supported by a weaker US Dollar (USD) amid improved market risk sentiment.
EU and US negotiators are reportedly closing in on a deal that would implement 15% tariffs on select Eurozone exports, with exemptions for key sectors such as aircraft, medical equipment, and alcohol, according to European Commission sources. The agreement would prevent the imposition of the 30% tariff threatened by US President Donald Trump earlier in July and potentially stave off a broader trade conflict.
Eurozone economic data has painted a mixed picture. Germany’s GfK Consumer Confidence Survey for August highlighted ongoing weakness in Europe’s largest economy, while the preliminary HCOB PMIs pointed to stronger-than-expected growth in business activity.
All eyes are now on the ECB’s policy meeting later today, where the central bank is expected to hold rates steady but may hint at future easing. Across the Atlantic, US preliminary S&P Global PMIs and weekly Initial Jobless Claims will round out the day’s key data releases.
Daily Digest Market Movers: Euro Supported by Trade Deal Hopes, ECB in Focus
- The Euro remains underpinned by growing optimism over a potential EU-US trade agreement, which continues to boost market risk appetite and limit the upside for the US Dollar. Despite this supportive backdrop, the EUR/USD pair is experiencing some profit-taking ahead of the European Central Bank’s (ECB) policy announcement, prompting a modest correction from recent highs.
- The ECB’s monetary policy decision is scheduled for 12:15 GMT on Thursday. While the central bank is widely expected to keep its Deposit Facility Rate unchanged at 2%, investors will be closely monitoring the accompanying Monetary Policy Statement for any hints regarding the timing and scope of potential rate cuts later in the year.
- Earlier in the day, Eurozone preliminary PMI data for July revealed a mixed but slightly positive picture. Manufacturing activity edged up to 49.8 from 49.5 in June, meeting expectations, while the services sector outperformed, climbing to 51.2 from 50.5—above forecasts of 50.8. However, German consumer sentiment remained subdued, with the GfK Consumer Confidence Index falling to -21.5 for August from -20.3 previously, missing expectations for a modest improvement to -19.2. This decline underscores persistent concerns about the health of Europe’s largest economy.
- In the US, attention will turn to preliminary S&P Global PMI data. The services index is expected to rise slightly to 53.0 from 52.9 in June, while the manufacturing gauge is projected to improve to 52.5 from 52.0, offering further clues on the resilience of the US economy.
EUR/USD Technical Outlook: Bullish Trend Intact, but Pullback Likely
EUR/USD is easing from recent three-week highs, with the 4-hour Relative Strength Index (RSI) showing overbought conditions—suggesting a short-term correction may be on the cards as traders lock in profits ahead of the ECB decision.
To the downside, the pair could find initial support at the ascending trendline drawn from the July 17 low, currently around 1.1740. Further support levels are seen at 1.1715 (Tuesday’s low) and 1.1680 (July 22 low). On the upside, immediate resistance lies at 1.1790 (July 7 high), followed by the long-term peak of 1.1830, last reached on July 1. The overall bullish trend remains intact as long as price action holds above key support zones.
