29.07.202510:34 Forex Analysis & Reviews: Why EUR drops sharply?

The euro plunged by more than 1% after the EU and the US reached a trade agreement, one that, apparently, not everyone agrees with.

European leaders are divided. Some supported the trade deal concluded with President Donald Trump, under which the European Union agreed to a 15% tariff on most of its exports to the US, while others opposed it, claiming it would trigger a sharp downturn in industry, particularly in Germany.

European Commission President Ursula von der Leyen, who met with Trump on Sunday at his golf club in Turnberry, Scotland, welcomed the agreement, saying it would bring stability and predictability to businesses and consumers. The EU knew the deal would benefit the US, but von der Leyen urged journalists not to forget where we came from, referring to Trump's threatened tariffs that could have reached 50%.

The rate reduction came as a relief for export-dependent EU countries, especially Germany, which exported $34.9 billion worth of new cars and auto parts to the US in 2024. "The agreement successfully averted a trade conflict that would have hit the export-oriented German economy hard," Friedrich Merz, Germany's chancellor, said in his speech. He noted that the agreement had helped protect their core interests, although he admitted he would have preferred a broader easing of transatlantic trade.

Economists estimate that without the agreement, the average effective tariff rate in the US would have risen from 13.5% to nearly 18% by August 1. The new deal lowers this figure to 16%. Against this backdrop, the euro fell against the dollar by the most in two months, losing 1%. This is the sharpest drop since May 12, and the euro is now showing the weakest performance among major currencies.

However, German automotive industry representatives disagree with Merz. In their view, the deal leaves the car sector vulnerable and makes European companies less competitive. "The agreement is an inadequate compromise and sends a disastrous signal to the closely intertwined economies on both sides of the Atlantic," said Wolfgang Niedermark, a member of the executive board of Germany's BDI industry federation. "The EU is accepting painful tariffs. Even a 15% tariff will have immense negative consequences for Germany's export-oriented industry."

France, which adopted a more aggressive stance during negotiations, emphasized the stability the deal brings but also recommended activating the EU's enforcement tool, a mechanism for large-scale retaliatory measures against the US, including targeting American tech companies and blocking US firms from public procurement in Europe. "Let's be clear: the current situation is not satisfactory and cannot be sustainable," French Minister for European Affairs Benjamin Haddad said in a social media post. "The free trade that has brought shared prosperity to both sides of the Atlantic since the end of the Second World War is now rejected by the United States, which is choosing economic coercion and complete disregard for WTO rules."

Dutch Foreign Trade Minister Hanneke Burma also said the deal is not ideal and urged the Commission to continue talks with the US. Hungarian Prime Minister Viktor Orban, long a thorn in the side of Brussels institutions, took an even harder line—partly criticizing von der Leyen and simultaneously praising the US president. "What's clear is that this isn't a deal Donald Trump struck with Ursula von der Leyen," Orban said in an online interview with a pro-government influencer on Monday. "Donald Trump ate Ursula von der Leyen for breakfast. The American president is a heavyweight negotiator, Madam President is featherweight."

It is clear that this division of opinions will only deepen as more concrete details of the US–EU trade agreement emerge, further weighing on the euro.

EUR/USD technical picture:

Right now, buyers need to figure out how to reclaim the 1.1580 level. Only then will it be possible to aim for a test of 1.1620. From there, a climb toward 1.1635 could follow—but achieving that without support from major players will be quite challenging. The farthest upside target is 1.1660. In case of a decline, serious buying interest is expected only around 1.1560. If no major buyers appear there, it would be reasonable to wait for a test of the 1.1510 low or consider opening long positions from 1.1480.

GBP/USD technical picture:

Buyers of the pound sterling need to reclaim the nearest resistance at 1.3360. Only that will make it possible to aim for 1.3385, which will be hard to breach. The farthest upside target is 1.3415. If the pair falls, bears will attempt to take control below 1.3330. If they succeed, breaking this range will deal a serious blow to the bulls' positions and push GBP/USD down toward the 1.3295 low, with a possible extension to 1.3255.