EUR/USD reversed sharply after an early bounce on Monday, as markets continued to digest the implications of the new US–EU trade framework. The pair’s drop was driven by a combination of Euro weakness and resurgent Dollar strength, reflecting an underwhelming investor response to the deal and shifting interest back toward US assets.
Euro’s softness wasn’t limited to the dollar. EUR/GBP and EUR/JPY also turned lower, confirming that selling pressure is broad-based. Meanwhile, the steep drop in AUD/USD and renewed surge in USD/CAD underline that Dollar bulls are firmly back in control, aided by widening rate differentials.
Criticism of the US–EU deal has intensified within the bloc. Many see the agreement as skewed in favor of the US, which extracted sweeping energy and investment pledges from the EU while locking in a 15% tariff on most goods—a sharp climb from the pre-Trump status quo. The deal is viewed less as a breakthrough and more as damage control.
French Prime Minister Francois Bayrou labeled the agreement “a dark day for Europe,” arguing that the EU had capitulated to Washington. Such sentiment reflects deeper discontent within the bloc, particularly among industries hardest hit by the tariff hike. While German and French equities initially opened higher, gains quickly faded as market participants reassessed the trade-off.
On the US side, the trade deal is being hailed as a strategic win. Investors see renewed clarity in transatlantic relations, and the large tariff buffer may give US inflation a further boost. That, in turn, could reinforce the Fed’s cautious approach. While a September cut remains likely, the pace of easing may stay slow and deliberate.
In the currency markets, Dollar is now the day’s top performer so far, followed by Loonie and Sterling. Euro and Swiss Franc are the worst performers, while Aussie, Kiwi, and Yen mixed.
Technically, intraday bias in EUR/GBP is turned neutral first with current steep retreat. Considering bearish divergence condition in 4H MACD, sustained trading below 55 4H EMA (now at 0.8679) should indicate short term topping at 0.8752. Deeper fall should then be seen to 38.2% retracement of 0.8354 to 0.8752 at 0.8600.
In Europe, at the time of writing, FTSE is down -0.14%. DAX is flat. CAC is up 0.28%. UK 10-year yield is up 0.01 at 4.641. Germany 10-year yield is down -0.017 at 2.705. Earlier in Asia, Nikkei fell -1.10%. Hong Kong HSI rose 0.68%. China Shanghai SSE rose 0.12%. Singapore Strait Times fell -0.47%. Japan 10-year JGB yield fell -0.036 to 1.569.
ECB’s Kazimir cites no urgency to cut rates again
Slovak ECB Governing Council member Peter Kazimir pushed back against expectations of a September rate cut, stating he doesn’t foresee any data “significant enough” to warrant action in the near term. Writing in a blog post, Kazimir, one of the more hawkish voices on the Council, emphasized that only clear signs like “unravelling in the labour market” would prompt him to support another cut.
Kazimir acknowledged that the US–EU trade deal brings a degree of stability, noting it “can help to ease concerns and regain confidence,” but cautioned that it’s too soon to judge its inflationary implications. He added that while inflation may dip below target in the coming year, he sees “no looming spectre of a sustained undershooting,” reinforcing his preference to wait and assess.
AUD/USD Mid-Day Report
Daily Pivots: (S1) 0.6544; (P) 0.6573; (R1) 0.6594; More…
AUD/USD’s pullback from 0.6624 accelerated lower today, but downside is contained well above 0.6453 support. Intraday bias remains neutral first. Rally from 0.5913 might still extend through 0.6624. However, considering bearish divergence condition in D MACD, upside should be limited by 0.6713 fibonacci level on next rise. Meanwhile, firm break of 0.6453 will turn bias back to the downside for deeper fall.
In the bigger picture, there is no clear sign that down trend from 0.8006 (2021 high) has completed. Rebound from 0.5913 is seen as a corrective move. While stronger rally cannot be ruled out, outlook will remain bearish as long as 38.2% retracement of 0.8006 to 0.5913 at 0.6713 holds. Nevertheless, considering bullish convergence condition in W MACD, even in case of another fall through 0.5913, downside should be contained above 0.5506 (2020 low).
