The Unites States and its ally across the pond, the European Union, have reportedly reached a trade agreement ahead of the August 1st deadline and market participants exhaled with a sigh of relief, as a deeper trade war has been averted.
The key features of the report entail that the US import levy will be set at 15% on a most EU goods, such as automobiles, semiconductors, and pharmaceuticals, yet the 50% tariff set on steel and aluminium will remain intact. Furthermore, raw materials, aerospace components and some chemicals will be duly exempted from taxation.
The reaction from the market was evidently swift, with the Euro falling lower against the dollar, by over 0.5% since the start of session, signalling that traders views that the EU got the short end of the stick, in other words that the deal reached, is and will be bad and disadvantageous for the Union.
A similar condition seen with the US-Japan deal was included in the draft between US-EU, where $750bn investment pledge by the Union was made for US energy products and additional $600bn for military equipment. (US possibly benefiting from the rearmament of the EU to meet the NATO quotas).
Contrary to that, the greenback and US equities rose higher at the premarket session, reflecting the United States broader “win” but also European equities (STOXX600), also made headway and climbed to 4-month highs, since tariff levies were “materially lower” than what they were originally threatened.
In other news, United States and Chinese delegations will meet in Stockholm, Sweden, in hopes of extending their trade truce which expires on August 12th . From the talks, traders will be looking closer at semiconductor exports details, as they have everything to do with the world’s largest corporation, Nvidia.
Technical Analysis
STOXX600 Chart – European equities climb closer to record highs after EU-US trade deal
Resistance: 555 (R1), 565 (R2), 575 (R3)
Support: 542 (S1), 534 (S2), 525 (S3)
