Euro Struggles as U.S.-EU Trade Deal Sparks Economic Concerns

The euro remained under pressure on Tuesday following steep losses triggered by a new U.S.-EU trade agreement widely viewed as favoring Washington. France labeled the deal a “dark day” for Europe, criticizing its 15% tariff on EU goods and warning of negative implications for the bloc’s economy. German Chancellor Friedrich Merz echoed concerns, citing “significant” damage to Germany’s export-driven economy.

The euro dropped 1.3% in the previous session, its sharpest fall in over two months, as investors feared weaker eurozone growth. By Tuesday, the currency edged 0.07% higher to $1.1594. Analysts, including NAB’s Ray Attrill, noted that markets quickly judged the agreement as detrimental for near-term growth prospects, despite initial hopes for stability.

The euro’s decline strengthened the U.S. dollar, which gained 1% against a basket of major currencies and held steady at an index level of 98.67. Sterling slipped to a two-month low of $1.3349, while the yen inched higher to 148.49 per dollar. The Australian dollar eased slightly to $0.6518, and the New Zealand dollar hovered near $0.5972. The offshore Chinese yuan remained steady at 7.1813.

U.S. President Donald Trump signaled further tariffs of 15% to 20% on exports from nations without bilateral agreements, exceeding April’s broad 10% tariff level. Meanwhile, U.S. and Chinese officials held over five hours of trade talks in Stockholm, aiming to extend their truce by three months.

Investors are also watching upcoming Federal Reserve and Bank of Japan policy decisions, with both central banks expected to hold rates steady but provide key signals on future moves.

The latest developments highlight growing market volatility as currency traders weigh trade tensions, economic risks, and central bank policies.