The Euro is now trading close to a one-month low because of worries over the EU-US trade deal. Surprisingly, the Eurozone’s GDP grew in the second quarter. The EUR/USD exchange rate is falling and is set for its first monthly drop since December. Before the US Federal Reserve makes its decision, the Euro is trying to bounce back but is struggling below 1.1575. It has dropped more than 2% since Monday. In the meantime, the US GDP is expected to show a 2.4% annual growth for the second quarter, bouncing back from a previous drop. On Wednesday, the main event will be the US Federal Reserve’s decision on interest rates, which will be closely watched, especially statements from Chairman Jerome Powell. Just days ago, the US experienced a drop in job openings and a rise in consumer confidence, although there are concerns about tariffs. The Euro is under pressure from a stronger US Dollar as US-China trade talks drag on. In Europe, GDP data showed slight growth, with better-than-expected results for German retail sales and France’s GDP. The EUR/USD remains weak, with technical indicators showing oversold conditions, and it may test the 1.1450 support level. Looking back to mid-2018 offers valuable insights. At that time, the EUR/USD struggled near 1.1500 due to trade deal worries. Today, the pair is much lower, around 1.0750, showing the long-lasting effects of changing monetary policies. Back then, the strong US dollar and tightening policies from the US Federal Reserve were in focus. Now, the scenario is more complicated, with the European Central Bank hinting at tougher measures to combat inflation, which remains steady at 2.8% in the Eurozone. In contrast, the US economy’s latest jobs report from July 2025 showed an unexpected slowdown in hiring. Concerns about trade have shifted from tariffs to issues like digital services taxes and regulatory differences, which continue to impact the Euro. However, the situation is no longer as one-sided. We should be cautious about expecting the dollar to rise on trade news alone, as it did before. Given the recent weak US data, the overly negative sentiment from 2018 may not be appropriate today. The market seems to expect the Fed to hold off on tightening before the ECB does. We are considering options strategies that benefit from volatility instead of simply betting against the Euro. Current technical indicators are not as oversold as they were back then. The EUR/USD has been trading in a narrow range ahead of next month’s central bank meetings. We see a chance to buy straddles on the EUR/USD, positioning ourselves for a significant price movement in either direction once central bankers clarify their plans.

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