The euro rose against the U.S. dollar following reports that the United States and the European Union had reached a hard-fought agreement under which the EU will face 15% tariffs. Although the EU pushed for 10%, 15% is far from the 30% threatened by Donald Trump, which could have led to a sharp decline in the EU's GDP.
It is worth noting that the deal was concluded in less than a week before the deadline for Trump's higher tariffs to take effect. The agreement was quickly endorsed by several European leaders, including German Chancellor Friedrich Merz and Italian Prime Minister Giorgia Meloni, who called it "sustainable."
Trump and European Commission President Ursula von der Leyen announced the agreement last Sunday at his golf club in Turnberry, Scotland. However, the full details of the agreement have not yet been disclosed, and no official documents have been published. The 15% tariff rate is set to take effect on August 1. "This is the biggest deal of them all," Trump said, while von der Leyen added that it would bring stability and predictability. Still, the lack of concrete details leaves open questions regarding the scope, exemptions, and enforcement mechanisms. Experts warn that a thorough analysis of the final text will be needed to assess the real impact on various sectors of the economy.
Nonetheless, the mere fact of reaching an agreement is seen as an important step toward easing transatlantic trade tensions and creating more favorable conditions for economic cooperation. The publication of official documents is expected to clarify the agreement's specifics and allow for an assessment of its long-term consequences.
As a result of the deal, EU exports will face significantly higher tariffs than those the EU will impose on imports from the U.S. Von der Leyen stated that the goal of the agreement is to rebalance the EU's trade surplus with the U.S. However, some of the compromises included in the deal sparked discontent among certain European industrial groups. Germany's main industry lobby declared that it sends a damaging signal to the deeply interconnected economies on both sides of the Atlantic.
Von der Leyen and Trump also disagreed on some key aspects of the announced deal. Trump claimed the tariffs would apply to cars and "everything else" except pharmaceuticals and metals.
Later, at a press conference, the head of the EU's executive body stated that the 15% tariff would be comprehensive, not cumulative with sectoral tariffs, and would apply to pharmaceuticals, chips, and cars. She noted that metal tariffs would be reduced and a quota system would be introduced. "We have a 15% tariff on pharmaceuticals. Whatever decision the U.S. president makes regarding the global approach to pharmaceuticals will be made on a separate sheet of paper," von der Leyen said, adding that the overall rate should not be underestimated but that this was the best deal achievable.
The EU also agreed to purchase 750 billion dollars' worth of American energy, invest an additional 600 billion dollars in the U.S. beyond current commitments, open EU markets to U.S. trade with zero tariffs, and purchase a substantial amount of military equipment. Von der Leyen noted that decisions regarding European wines and spirits have not yet been finalized, but this issue will be resolved soon.
According to economists, without the deal, the average effective U.S. customs duty rate would rise to nearly 18% by August 1, up from the current 13.5%. The new agreement reduces this to 16%.
As previously mentioned, the deal does not apply to steel and aluminum exports from the EU, which will still face 50% tariffs. Meanwhile, aerospace products will continue to be exempt from tariffs. Officials also discussed the terms of a quota system for steel and aluminum imports, which would impose a lower import tax rate below a certain threshold and a standard 50% rate above that level.
Only time will tell what the new EU–U.S. trade agreement will bring, but for now, traders and investors have reacted positively, as reflected in currency and stock markets.
As for the current EUR/USD technical picture, buyers need to focus on reclaiming the 1.1760 level. Only then will a test of 1.1790 become feasible. From there, a move toward 1.1825 is possible, though difficult without support from major market participants. The furthest target is the 1.1860 high. If the pair drops, major buying interest is expected only around the 1.1730 level. If there is no activity there, it would be preferable to wait for a retest of the 1.1710 low or consider long positions from 1.1680.
Regarding the GBP/USD technical picture, pound buyers need to break through the nearest resistance at 1.3450. Only then will a push toward 1.3475 become possible, though breaking above that may be challenging. The ultimate target is the 1.3500 level. In case of a decline, the bears will attempt to regain control around 1.3410. A break of this range would deal a serious blow to the bulls' positions and push GBP/USD toward the 1.3380 low, with the potential to extend to 1.3350.
