- The EUR/USD pair remains steady near 1.1600 on Monday, reflecting Friday’s robust NFP gains.
- Investor sentiment in the Eurozone declines as the Sentix Investor Confidence Index drops from 4.5 in July to -3.7 in August.
- US factory orders decreased by 4.8% in June, reversing the 8.3% increase seen in May and hinting at a slowdown in manufacturing.
On Monday, the Euro (EUR) is holding its ground against the US dollar (USD). The weaker-than-expected US non-farm payroll (NFP) report will likely reinforce the gains from Friday, especially after the Federal Reserve hinted at potential interest rate reductions in September. Still, there’s an air of caution regarding the recently announced trade framework between the US and the EU, which has faced significant backlash from several European leaders. This deal seems to favor the US, raising concerns about its long-term implications for the Eurozone’s competitiveness.
As of this writing, the EUR/USD is trading around 1.1557 in US trading hours. The pair is finding it challenging to break through the psychological barrier of 1.1600, primarily due to the lack of fresh sentiment and macroeconomic drivers.
In an additional note of concern, the August Sentix Investor Confidence Index revealed a significant drop in Eurozone sentiment. According to the data provider, this weekly survey, which covers thousands of investors from over 20 countries, indicates that the latest agreement is viewed as a “feeling-minded transaction,” with many seeing Trump and the US as “winners” at the Eurozone’s expense.
The index has fallen to -3.7, marking the first negative reading since March. Both current and expected conditions have worsened notably, with analysts pointing to growing tensions over the US-EU tariff framework as a primary reason for this gloomy outlook. “The tariff negotiations have really dampened the mood,” said Manfred Huebner, managing director at Sentix, in a statement.
A trade framework agreement between the US and the EU was reached on July 27, which will entail a 15% import duty on most EU goods, a sharp increase from the previous average of 4.8%. While the agreement has avoided more severe complications, it sidestepped the 30% import duties previously threatened by US President Trump under a voluntary deadline set for August 1.
Earlier on Monday, a spokesperson for the European Commission confirmed that the EU would hold off on retaliatory trade measures against the US for six months. “The EU is continuing discussions with the US to finalize the joint statement as agreed on July 27,” the spokesperson noted, emphasizing that the deal is still under negotiation.
On the US side, beyond the disappointing labor market figures from Friday, the recent factory order report adds to a cautious view of the US economic outlook. Factory orders dropped by 4.8% month-over-month in June, failing to meet expectations of an upwardly revised 8.3% rise in May.
Looking ahead, the weaker-than-anticipated NFP report has shifted market expectations significantly, with traders now pricing in a 77% chance of a 25 basis point rate decrease at the Federal Reserve’s next policy meeting in September. This shift in sentiment is weighing on the US dollar and could offer some support to the euro in the near term.
