- EUR/USD succumbed to the selling pressure despite hitting new highs.
- The US Dollar regained the smile and bounced off recent lows.
- The ECB left its policy rate unchanged, matching the broad consensus.
The single currency snapped its positive streak against the Greenback on Thursday, prompting EUR/USD to face fresh downside pressure and receding to the low 1.1700s.
The US Dollar Index (DXY), in the meantime, advanced modestly and revisited the 97.50 zone amid further assessment of the recent progress on the trade front, while a Trump visit to the Federal Reserve late on Thursday has reignited some jitters around the Fed’s independence.
Tariff suspense lingers
Delaying the next tariff decision until August 1 has done little to calm nerves.
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Brussels is already preparing “anti‑coercion” measures that could bar US firms from EU public tenders if negotiations collapse. President Trump has warned that Europe will be targeted if no agreement materialises. It is worth recalling that two EU officials said on Wednesday that the European Union (EU) was nearing a trade agreement with Washington that would result in a 15% tax on EU products imported into the United States.
For now, the US–Japan accord offers a brief respite, but investors remain acutely aware of the ticking tariff clock.
Two central banks, two very different messages
The June FOMC Minutes revealed a divided Committee: some policymakers back swift cuts, while others prefer to wait and see whether tariff‑driven inflation sticks. A rise in the June CPI supports Chair Jerome Powell’s cautious stance, though futures markets still price in modest easing later this year.
In Frankfurt, the European Central Bank (ECB) kept interest rates unchanged and provided a cautiously positive evaluation of the eurozone economy. This statement has led to uncertainty among investors regarding the possibility of additional policy easing, despite the overshadowing concerns related to US tariff threats.
In her press conference, President Christine Lagarde stated that the economy was now in a “good place” and that growth was in line with projections or “a little bit better,” which strengthened market expectations that the ECB might have finished cutting rates altogether.
Financial markets that had previously anticipated a rate cut this autumn have now adjusted their expectations, now indicating only an 80% likelihood of such a move, with the possibility that it may not occur until the spring.
Positioning: Speculators versus hedgers
CFTC data to July 15 showed speculators lifting net long Euro positions to roughly 128K contracts, the most bullish stance since December 2023. Commercial participants moved the other way, expanding net shorts to around 184K contracts. additionally, open interest has climbed for four straight weeks to just over 820K contracts, the highest level since March 2023.
Key levels on the chart
A decisive move above the YTD peak of 1.1830 (July 1) would pave the way for the September 2021 top at 1.1909 (September 3), prior to the significant milestone at 1.2000.
OOn the downside, if the price drops below the July base at 1.1556 (July 17), it would activate the 55-day simple moving average (SMA) at 1.1510, followed by the weekly low at 1.1210 (May 29) and the May valley at 1.1064 (May 12).
Momentum has improved but remains tentative, with the Relative Strength Index (RSI) near 63, and the Average Directional Index (ADX) around 22, suggesting that the trend might lack strength.
EUR/USD daily chart
What could tip the balance
The Euro’s grind higher is unfolding against a backdrop of tariff uncertainty and diverging policy paths. A shift in Washington’s stance on trade, or a suggestion that the Fed may change course first, could provide the single currency with newfound momentum. Until then, Euro bulls are keeping close watch on the August 1 tariff deadline and resistance at 1.1830 for clues to the pair’s next move.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region.
The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa.
The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro.
QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
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