EUR/USD pulls back from three-week highs with all eyes on the ECB.

The Euro retreats from three-week highs with the bullish trend intact on hopes of an EU-US trade deal.
News reports anticipate an agreement that would include 15% baseline tariffs for EU products.
The ECB is expected to leave rates on hold, but it might hint at further easing down the road.

The EUR/USD pair is trimming gains on Thursday, after having rallied on news reports that the European Union (EU) and the United States (US) might be close to a trade deal. The positive preliminary Eurozone PMIs have failed to support the common currency, as investors close Euro long positions ahead of the ECB decision.

The Euro (EUR) is trading at 1.1750 ahead ogf the US market opening, down from a three-week high at 1.1780 reached after the news of the trade deal with the US was released. The pair, however, maintains its immediate bullish trend intact, as the safe-haven US Dollar (USD) struggles to find demand in risk-on markets.

EU and US representatives appear to have brought their positions closer to reaching a deal that would include 15% tariffs for products from the Eurozone, with exemptions for aircraft, medical devices, and alcohol, according to European Commission officials. This agreement would avert the 30% tariff announced by US President Donald Trump earlier in July and, above all, a set of retaliations from the EU that might spiral into a trade war.

Eurozone macroeconomic data have been mixed. The German GfK Consumer Confidence Survey for August confirmed the weak momentum of the Eurozone’s major economy, while the preliminary HCOB Purchasing Managers Index (PMI) showed that business activity grew beyond expectations.

Later in the day, the focus will be on the European Central Bank’s (ECB) monetary policy meeting. In the US, the preliminary S&P Global PMIs and the weekly Initial Jobless Claims will provide the fundamental background.