The euro saw a slight improvement on Wednesday, with the EUR/USD pair rising to the 1.1670 area, driven by mild weakness in the U.S. dollar. This came as traders continued to assess new comments from U.S. President Donald Trump, who this time called on Federal Reserve member Lisa Cook to resign, adding further political pressure on the U.S. central bank.
At the same time, no significant geopolitical developments emerged, while market attention shifted toward preliminary PMI data due Thursday, along with Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole symposium on Friday.
On the global trade front, some relief was felt after Washington and Beijing announced a 90 day extension of their truce agreement, just hours before new tariffs were set to take effect. President Trump signed an executive order postponing the tariff hikes until November 10, while China pledged reciprocal steps. Nevertheless, current tariffs remain high, with U.S. duties on Chinese exports at 30% and Chinese tariffs on U.S. goods at 10%.
As for trade relations between the U.S. and the European Union, there had been a partial breakthrough earlier when Brussels cut most tariffs on U.S. goods to 15% from the previously planned 30%, while also committing to $750 billion in U.S. energy purchases, additional defense deals, and over $600 billion in U.S. investments. However, the European reaction remained cautious, as German Chancellor Friedrich Merz warned the deal could pressure the manufacturing sector, while French President Emmanuel Macron described the day of the agreement as a “dark day for Europe.”
Regarding monetary policy, the U.S. Federal Reserve kept interest rates unchanged in its latest meeting, with Chair Jerome Powell seeking to maintain a delicate balance between stability and the more dovish views of some members such as Christopher Waller and Michelle Bowman. The meeting minutes indicated that these members did not gain broader support for a rate cut, despite the rising impact of tariffs on certain prices and ongoing uncertainty about the overall effect on the economy and inflation. The minutes also noted that the Fed may be forced to make tough decisions if inflation stays elevated and labor market conditions weaken further.
In Europe, ECB President Christine Lagarde described eurozone economic growth as “resilient, albeit with slight improvement,” prompting markets to delay expectations for the first rate cut until the spring of 2026.
Meanwhile, investor appetite for the euro declined, with the U.S. Commodity Futures Trading Commission’s report up to August 12 showing net long positions falling to a six-week low of around 115.4K contracts. At the same time, commercial traders raised net short positions to over 167K contracts, the highest in two weeks, alongside a rise in total open interest to nearly 825K contracts after two weeks of declines.
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