EUR/USD: Euro Crashes 1.3% for Worst Day Since May. Why the Selloff After the US-EU Deal?

Some EU members raised concerns that the deal between Trump and Von der Leyen would actually hit the Eurozone economy in more ways than one.

💶 Worst Day Since May

• The EURUSD pair sank 1.3% on Monday for its worst trading session since May after the European Union’s Ursula Von der Leyen struck a deal with President Donald Trump. The weekend bargaining was initially met with indifference — the euro even gained a few pips.
• Shortly after, the lack of enthusiasm turned into a bruising selloff. But why? The agreement, praised by Von der Leyen as “the biggest trade deal ever,” locked in 15% tariffs on most EU imports to the US — avoiding a threatened 30%, but still triple the pre-April levels.
• By the end of the session, the euro had slipped below $1.16, erasing all its progress made in the last week and drifting way too far from its four-year high. Early on Tuesday, the selling continued with the euro visiting the $1.1550 neighborhood.

⚠️ Germany and France Push Back

• EU unity just got tested: Germany’s Friedrich Merz warned the deal would raise inflation and hurt transatlantic trade, a rare direct rebuke of Brussels’ top leadership.
• France’s Prime Minister François Bayrou called it a “dark day,” accusing the EU of “resigning itself into submission.” The frustration stems from the belief that the bloc caved to US pressure without sufficient concessions.
• The harsh responses from core EU members fueled fears that the Eurozone’s political cohesion and economic stability could weaken further — a sentiment forex bros wasted no time pricing in.

📉 Why Did the Euro Sell Off So Hard?

• While the deal technically avoided a full-blown trade war, investors realized the agreed terms still marked a steep increase in tariffs — enough to pressure EU exporters and squeeze margins across key industries.
• The 15% tariff rate applies broadly, including sectors that previously enjoyed minimal duties. That’s bad news for European exporters already navigating weak demand, sticky inflation, and soft data.
• Beyond economics, the selloff reflects a loss of confidence in the EU’s negotiation strength, with markets betting that internal political discord could now spill over into policymaking, growth, and investor sentiment.

👉 The Takeaway

• The euro’s sharp drop shows that avoiding disaster isn’t the same as securing a win. With ECB easing on pause, growth momentum fragile, and trade dynamics uncertain, the euro-dollar could remain under pressure — especially if more EU leaders voice concern over the deal’s long-term impact.