The euro fell against the US dollar in early Tuesday trading, extending the downward momentum from the previous session, when the single currency lost more than 1.5% — its steepest single-day drop so far this year. The key question now is whether this bearish sentiment towards the euro will persist, or whether currency traders will reassess their positioning once the initial disappointment fades. That disappointment stems from what is widely seen as a suboptimal outcome: a 15% baseline tariff on European exports to the US. It is difficult to interpret the US-EU agreement as anything other than a win for the US administration — a perception that fuelled a dollar rebound and brought relief for the greenback, which had been down nearly 14% against the euro at the start of July. Traders will now focus on the finer details of the agreement, which could yet shift market sentiment as they emerge. For the time being, however, the euro has clearly been the main loser, with markets pricing in a scenario where the burden of tariffs is expected to weigh more heavily on European exporters than on US consumers. Whether this view continues to gain traction will play a key role in the performance of the single currency during the second half of the year.
Ricardo Evangelista, ActivTrades
Source: ActivTrader
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