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The Euro (EUR) regained strength against the US Dollar, with the EUR/USD pair making a significant recovery after plunging to three-week lows near 1.1560. Despite the White House postponing new tariff decisions until August 1, concerns over a widening trade war are weighing on the European currency.
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US threats of 30% levies on EU goods, combined with recent announcements of tariffs on Japanese and South Korean imports, have stoked fears of a confrontation and lent support to the dollar. EU trade leader Maros Sefcovic is in Washington to discuss tariffs with US officials.
The Federal Reserve’s June meeting minutes revealed a divided committee, with some officials pushing for immediate rate cuts and others urging caution. Fed Chair Jerome Powell has maintained a cautious stance, citing inflation concerns. In contrast, the European Central Bank (ECB) has held firm, signaling that further policy loosening will only happen if there’s clear evidence of faltering external demand.
Speculators have piled into euro longs, with CFTC data showing net long positions surged to the highest since December 2023. Technically, EUR/USD must clear its 2025 tops of 1.1830 to target the June 2018 peak at 1.1852. A break below July’s base at 1.1562 could pave the way to the 55-day SMA at 1.1467 and lower levels.
With US tariff policy still in flux and the Fed-ECB policy gap widening, the Euro may struggle to mount a sustained rally. However, any clear sign of Fed moderation or fresh indications of slowing trade tensions could quickly shift the balance back in the single currency’s favor.
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Jonathan Nwokpor
