The euro has fallen below the $1.17 mark, retreating from its 2021 highs recorded last month as escalating trade tensions continue to dampen investor confidence. The President of the United States indicated that the European Union (EU) will soon receive a communication detailing the specific tariff rates it will encounter. This implies that the EU's efforts to finalize a trade agreement by the August 1st deadline are struggling. Furthermore, he has indicated plans to enforce broad tariffs ranging from 15% to 20% on most trade partners, further challenging earlier expectations of a base tariff rate of 10%.
Despite the decline observed in the first half of July, the euro has appreciated nearly 13% against the dollar over the course of this year. This uptrend is driven by widespread dollar weakness and renewed optimism about economic recovery, particularly after Germany's shift towards increased fiscal spending. On the monetary policy front, it is widely anticipated that the European Central Bank (ECB) will maintain interest rates at their current levels this month. However, market expectations still predict at least one more rate cut before the year concludes.
