Investing.com — Sterling edged lower on Monday while the euro also slipped modestly, as the dollar held firm amid persistent geopolitical uncertainty and elevated energy prices.
As of 08:58 ET (12:58 GMT), fell 0.02% to 1.3514, while dipped 0.01% to 1.1763, with both pairs easing from recent highs as the greenback steadied.
The dollar found support following renewed tensions linked to the Middle East, with shifting headlines around U.S.-Iran developments continuing to underpin and limit downside in the currency.
While markets have intermittently priced in de-escalation, the stop-start nature of developments has kept investors cautious.
Analysts at ING Group noted that the dollar is searching for a new near-term equilibrium, with price action increasingly shaped by the interaction between geopolitical risks and energy market volatility. Elevated oil prices remain a key constraint on a broader dollar decline, particularly as inflation expectations show signs of firming.
In Europe, the euro struggled to regain momentum above the 1.18 level, with markets reassessing expectations for European Central Bank policy tightening.
While a June rate hike remains possible, pricing has become less certain, and analysts continue to see EUR/USD trading closer to the mid-1.17 range in the near term.
Sterling, meanwhile, remained under pressure amid a mix of softer rate expectations and renewed political focus in the UK.
Attention is on Prime Minister Keir Starmer, who faces scrutiny over government decisions and parliamentary developments, adding to near-term uncertainty for the pound.
The dollar’s resilience also reflects a cautious reassessment of market positioning, with investors reluctant to extend bearish bets given stable U.S. rate expectations and rising concerns that prolonged energy price strength could feed into inflation dynamics.
Comments from Federal Reserve officials have reinforced the risk that persistent oil shocks may delay any easing cycle.
Due to a relatively light economic calendar, currency markets will likely be affected by geopolitical headlines, oil price movements, and expectations from central banks. Further direction will be provided by upcoming developments, including policy signals from the Federal Reserve and key political events.
