Euro Nears 2021 High Amid Progress on US-EU Trade Deal

The euro rose slightly above $1.175, nearing its highest level since August 2021, as trade tensions eased after news that the US had proposed a deal to the EU maintaining a 10% baseline tariff, with exemptions for sensitive sectors such as aircraft and spirits. The EU is aiming to finalize a preliminary agreement with the US this week to lock in the 10% rate beyond the August 1 deadline while negotiations continue toward a permanent deal. Investor sentiment also improved after President Donald Trump spared the EU from additional tariffs ahead of the initial July 9 deadline. Meanwhile, the EU announced it was preparing retaliatory tariffs on a range of US products in response to US metal duties. Officials warned that if an agreement isn’t reached, further actions—such as export controls and restrictions on US access to public contracts—could be implemented. On the monetary policy front, markets are now pricing in just one more rate cut from the European Central Bank this year.