EUR Weakens as ZEW Survey Reveals Negative Sentiment on US-EU Trade Deal

ZEW Confirms Weak EU Sentiment on US Trade Deal, but EUR/USD Holds Bullish Potential

Euro sentiment dips amid unpopular trade deal
The latest ZEW surveys published Tuesday show a clear downturn in sentiment among European investors, reaffirming the negative reception of the recently struck US-EU trade agreement. In Germany, the "expectations" index dropped to 35, while the eurozone reading slid to 25 — both reaching their lowest levels since May. These figures reflect skepticism about the trade deal’s long-term economic benefits for the EU.

Markets shrug off ZEW, focus on ECB and Fed dynamics
Despite the negative economic sentiment reflected in the ZEW data, markets are not overly reactive. Pricing for the European Central Bank’s (ECB) December meeting has shifted modestly, moving from -15 basis points last week to closer to -10 basis points, indicating slightly reduced expectations for dovish policy action. However, analysts believe this is still too dovish and anticipate potential euro weakness further down the line — although not imminently.

EUR/USD outlook remains constructive post-US inflation data
Following the release of softer US CPI data earlier this week, the bullish case for EUR/USD has strengthened. The US Dollar has come under pressure as markets boost expectations for a Federal Reserve interest rate cut in September. This macro backdrop is offering short-term support to the Euro, with EUR/USD nearing key resistance levels.

Still, market participants remain cautious ahead of Friday’s high-stakes Trump-Putin summit in Alaska, which could introduce geopolitical volatility. A convincing break higher in EUR/USD may only materialize once the summit outcome becomes clearer.

Conclusion
While economic sentiment in the eurozone has taken a hit following the trade deal, the broader direction of EUR/USD will likely remain driven by Fed policy expectations and global risk sentiment. The bearish ZEW readings might influence long-term euro perception, but near-term movement is tilted toward the upside.