- The EUR/USD is expected to decline as the US dollar strengthens following a new trade agreement.
- Trump took this opportunity to criticize Fed Chairman Powell, suggesting he will be out in eight months.
- The ECB is likely to keep interest rates unchanged on Thursday.
The EUR/USD pair has retreated from a two-week peak, hovering around 1.1740 during Asian trading hours on Wednesday. The dip comes as the US dollar gains strength, particularly after President Trump announced a trade agreement with Japan that includes a 15% tariff on Japanese exports. This deal also entails a $550 billion investment from Japan into the US, helping to open the market for numerous American products.
“I think we’re close to finalizing a trade deal,” Trump remarked during a session with Philippine President Bonbon Marcos on Tuesday. He further noted that he isn’t particularly worried if the Philippines grows closer to China.
Despite the dollar’s potential upswing, concerns over the Federal Reserve’s independence may dampen the effect. Trump took the chance to voice his disapproval of Fed Chair Jerome Powell, asserting that “Powell will be out soon. He has to leave in eight months.” Trump maintains that the economy is robust, while questioning the Fed’s high-interest rate stance, suggesting, “We should be at 1%.”
Now, traders are anxious to see consumer confidence indicators from the European Commission (EC), with expectations pointing to a 15 percentage point drop in July. The European Central Bank (ECB) is gearing up for its interest rate announcement on Thursday, though no changes are anticipated. Last month, ECB President Christine Lagarde indicated that the easing cycle had ended, following an eight-quarter reduction bringing rates down to 2.0%.
