Euro Near Four-Year High as U.S.-EU, Japan Trade Deals Lift Market Sentiment

The euro edged closer to its strongest level in nearly four years on Thursday, buoyed by optimism over new trade agreements between the United States and key partners, including the European Union and Japan. The potential U.S.-EU deal may feature a 15% baseline tariff on EU goods with possible exemptions, according to European diplomats. This follows Washington’s agreement with Tokyo, which reduces auto tariffs and secures a $550 billion package of U.S.-bound investment and loans.

Global markets responded positively, with investors shifting away from the U.S. dollar and risk-sensitive currencies rallying. The Australian dollar climbed to an eight-month high of $0.6604, while the euro traded at $1.1768, near the $1.1830 peak hit earlier this month, marking its highest level in over three years. The U.S. dollar slipped 0.03% against the yen to 146.38, extending its decline for a fourth session despite Japan’s ongoing political uncertainty following Prime Minister Shigeru Ishiba’s denial of resignation rumors after an election defeat.

Sterling held firm at $1.3582, while the New Zealand dollar hovered at $0.6046. The U.S. dollar index remained steady at 97.21.

Beyond trade negotiations, market focus has shifted to the European Central Bank’s upcoming rate decision. While no immediate policy change is expected, investors are watching closely for signals on future monetary easing, with another rate cut anticipated by December. The recent trade breakthroughs and potential ECB actions are shaping currency market dynamics, reinforcing risk appetite amid easing geopolitical tensions.