EUR/USD Drops to 1.1600 on US-EU Trade Uncertainty and Strong USD

EUR/USD Slips Toward 1.1600 as US-EU Trade Talks Drive Caution

Euro Weakens Despite Previous Gains

The EUR/USD pair is down to around 1.1620 in early Monday trading after posting moderate gains in the previous session. The movement reflects growing market caution as traders wait for clearer signals from US-EU trade negotiations, especially ahead of the August 1 US tariff deadline.

Market Eyes US-EU Trade Talks Ahead of August 1

US Commerce Secretary Howard Lutnick expressed optimism over reaching trade deals with major partners, including the European Union (EU), before the impending tariff deadline. In a CBS News interview, Lutnick stated:

"The next two weeks are going to be record book weeks. President Trump is going to deliver for the American people."

Lutnick also confirmed active dialogue with European negotiators and said there’s "plenty of room for compromise," indicating a potential breakthrough.

Still, the August 1 deadline remains firm, and any failure to strike a deal could lead to a new round of tariffs—an event that would likely increase USD demand as a safe-haven, to the detriment of the Euro.

Dovish Fed Outlook Keeps USD in Check

Despite the firmer US Dollar (USD) on Monday, dovish sentiment around the Federal Reserve’s interest rate path continues to cap USD upside potential. Fed policymakers, including Governor Christopher Waller, have hinted at possible rate cuts starting later this year, in response to weakening economic signals.

This mixed dynamic—hawkish trade threats versus dovish Fed expectations—is creating a choppy trading environment for EUR/USD, with little clear direction until concrete policy actions or agreements emerge.