FX.co ★ Euro Extends Gains on Likely Trade Agreement

The euro appreciated to $1.175, maintaining proximity to its peak level since August 2021, with indications suggesting a forthcoming trade agreement between the US and the EU. Reports noted that EU diplomats were poised to concur on 15% tariffs imposed by the US. Should this be confirmed, the measure would avert the US from implementing the previously threatened 30% tariffs on EU goods, aimed at mitigating the repercussions of the trade war that exacerbated the bloc's growth challenges. The European economic landscape faced adversities due to the US trade conflict, prompting market speculation that the European Central Bank (ECB) might adopt a dovish stance to its policy outlook, especially with the risk of inflation falling below its established target. On Thursday, the ECB is broadly anticipated to maintain its interest rates steady, following eight consecutive cuts, while rate futures suggest an additional 25 basis point cut might occur by year's end. In contrast, the Federal Reserve is expected to implement two 25 basis point rate cuts within the year.