EUR/USD Holds Below 1.18 as Markets Weigh Trade Pact Hopes and ECB Pause

EUR/USD Holds Below 1.18 as Trade Pact Hopes and ECB Pause Shape Market Tone

The EUR/USD currency pair is consolidating below the key 1.18 handle, after a four-day rally that pushed it to 1.1740 during the early Friday session. Euro strength has been supported by renewed optimism around a potential trade pact between the European Union (EU) and the United States (US) ahead of the August 1 deadline.

Market Sentiment Shaped by Trade and Tariff News

News emerged that the US is considering a blanket 15% tariff on all EU imports. However, both sides have refrained from confirming recent negotiation specifics. President Donald Trump previously stated that he would reconsider a 30% tariff threat if the EU agreed to “open up” to US businesses.

US Treasury Secretary Scott Bessent said that positive momentum in trade talks with the EU is underway. This helps the Euro sustain recent gains despite stalling near resistance.

Related Read: US-EU Tariff Developments and Their Impact on EUR/USD

ECB Remains in Wait-and-See Mode

As expected, the European Central Bank (ECB) held interest rates steady this week. President Christine Lagarde noted that with inflation near the 2% target and the economy performing better than anticipated, the ECB is in a good position to observe and assess.

ECB policymaker Isabel Schnabel added that the bar for further rate cuts remains high, signaling no imminent shift in the central bank’s policy stance.

EU-China Summit Offers Limited Progress

Elsewhere, EU-China trade negotiations yielded minimal results. European Commission President Ursula von der Leyen stressed the need for more balanced trade relations with China and raised issues such as export controls on rare earth materials and overcapacity. Nonetheless, she described the talks as “constructive and pragmatic.”

Key Takeaways

• EUR/USD trades near 1.1740, stalling below 1.18 after a strong rally.
• Trade optimism and hopes for a US-EU agreement support the Euro.
• The ECB remains cautious, signaling a high bar for further cuts.
• US tariff threats linger but have not been confirmed.
• Traders await further clarity on trade negotiations and economic data.

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