EU talks with the US pick up speed - Commerzbank

Following the announcement of the deal with Japan, it seems that negotiations with the EU are also gathering momentum. Yesterday, the US Treasury Secretary stated that the Japan deal was not a blueprint for the EU, as the latter had not yet presented any such 'innovative' ideas. Reports in the days leading up to this announcement were not particularly promising either, emphasising Trump's increasingly hardened stance and the EU's preparations for counter-tariffs, Commerzbank's FX analyst Michael Pfister notes.

ECB meeting is unlikely to be particularly exciting

"Reports emerged that the EU and the US were moving closer together, suggesting that a deal on 15% tariffs on most EU exports to the US was possible -- close to the lower limit that Trump reiterated last night. The reports suggested that EU countries could accept such a deal, with attempts being made to include important car exports. After all the turmoil of recent months, such a deal would certainly bode well for the euro, which is why we saw EUR/USD move back towards 1.18 yesterday."

"Ultimately, Donald Trump must agree to the deal. He may impose the tariffs announced in the letter on 1 August, he may agree to the deal, or he may do something completely different. It should not be forgotten that the EU is one of the US president's favourite bogeymen, and that a deal such as the one currently being discussed would not be too bad for the EU -- at least compared to the other scenarios discussed in recent months. Therefore, we could be in for some exciting twists and turns in the coming days until a deal is finally announced."

"Amidst the trade talks, the ECB is holding its regular meeting today. However, the meeting is unlikely to be particularly exciting. The central bank is expected to leave interest rates unchanged, and no new forecasts will be published. Things are likely to become more interesting regarding the September meeting. Our economists continue to assume that the ECB will deliver its final interest rate cut for the time being then, although the market is still undecided on this. Nevertheless, given the ongoing trade negotiations and the fact that the interest rate cut cycle is coming to an end, the ECB President is unlikely to reveal her hand at today's press conference. Therefore, the talks with the US are likely to be more relevant for the euro in the short term."