The US and the European Union have agreed on a trade deal that affects the Euro (EUR). A key aspect of this deal is a 15% rate, with more details coming soon. In early morning trading, the EUR has risen in a market with low liquidity. There are also expectations that the US and China will continue their tariff pause for another three months, according to a South China Morning Post report. As of July 28, 2025, indicative rates show these changes. Traders should be cautious of possible price fluctuations until more markets in Asia open to enhance liquidity. According to Mr. Sheridan’s update, derivative traders should start pricing in lower uncertainty. This deal reduces a significant risk, so we expect the implied volatility of EUR/USD options to drop from around 9% to the 6-7% range in the coming weeks. Selling volatility through strategies like short straddles or strangles could be a smart move as the market adjusts to this newfound stability. This news is good for the Euro, providing a boost to the Eurozone economy, which relies heavily on exports. We are considering investing long in the EUR, possibly through call options to reduce risk while taking advantage of the anticipated upward trend. The 1.08-1.09 range for EUR/USD seems to be a solid support level, with a clear path toward 1.12. We will keep an eye on the next German ZEW Economic Sentiment survey for further signs of improvement. The most recent reading was 47.1, and this trade deal should help push sentiment above 50, indicating renewed optimism in Germany, the largest economy in the Eurozone. A strong result would support a more bullish outlook for the Euro. From a monetary policy standpoint, this deal could change the European Central Bank’s (ECB) plans. Markets had been expecting two more rate cuts this year, but with the easing of trade tensions, the ECB might only cut rates once. This shift in expectations will likely boost the Euro against the dollar. We have seen a similar pattern during the trade disputes in 2018-2019, where reduced tensions sparked rallies. Recent data from the CFTC shows that speculative long positions in the Euro have dropped to just over 40,000 contracts, which is relatively low. This suggests there is room for traders to re-enter long positions, which could lead to a sharp rally. The news of an extended ceasefire with China reinforces positive sentiment in the global markets. This development eases another major source of economic uncertainty, benefiting currencies like the Euro. We believe that the path for EUR/USD is likely to rise in the medium term.

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