Credit Agricole highlights that EUR/USD may be vulnerable to disappointments as optimism around a possible US–EU trade deal appears increasingly priced in.
Key Points:
Trade deal optimism priced in
• Recent official European comments have hinted that a US–EU trade deal “in principle” could be announced imminently.
• This growing optimism has underpinned EUR/USD strength in recent weeks.
Risk of disappointment
• Given that EUR/USD has already rallied on these expectations, any delay, lack of concrete details, or a less market-friendly outcome could trigger a sell-off.
Focus on tariff risks
• FX markets will also watch for any fresh tariff threats or “tape-bombs” that could dampen risk sentiment and weigh on EUR/USD.
Conclusion:
Credit Agricole advises caution: while the trade deal headlines have been a tailwind, they believe many positives are now fully reflected in EUR/USD levels. This leaves the pair vulnerable to disappointment, especially if trade talks fail to deliver a decisive breakthrough.
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