The Euro to Dollar (EUR/USD) exchange rate climbed to 1.1794 on Tuesday as fading safe-haven demand for the US Dollar and renewed optimism over US–Iran talks pushed the pair towards fresh multi-week highs.
Pound to Euro (GBP/EUR): 1.1502 (+0.14%)
Pound to Dollar (GBP/USD): 1.35596 (+0.32%)
Euro to Dollar (EUR/USD): 1.1789 (+0.19%)
DAILY RECAP:
EUR/USD extended gains through Tuesday, building on a steady move higher from last week’s 1.1690 area.
The move follows a sharp reversal in US Dollar sentiment.
Earlier in the week, the US currency strengthened after failed US–Iran talks and the announcement of a naval blockade drove oil prices sharply higher and triggered a move into safe-haven assets.
That support did not hold.
According to Scotiabank, it has since been “a one-way street lower for the USD” as markets adopted a more positive view on the geopolitical outlook and risk appetite improved.
The easing in tensions helped pull crude prices and volatility lower, reducing demand for defensive positioning and dragging the Dollar back.
At the same time, softer US producer price data added to the downside pressure, reinforcing expectations that the Federal Reserve may not need to tighten policy as aggressively in the near term.
The Euro moved higher alongside the shift in sentiment.
Support came from rising Eurozone yields and persistent inflation risks tied to energy markets, even as ECB rhetoric showed some moderation.
Scotiabank noted the Euro has “pushed to fresh local highs nearing 1.18” as broad-based Dollar weakness continues to dominate price action.
Price action remained firm through the session, with EUR/USD pushing through resistance around 1.1780 before testing the 1.18 handle.
Near-Term EUR/USD Forecast: Geopolitics and Data to Set Direction
The Euro should remain supported while inflation risks linked to energy markets persist and ECB policy expectations remain relatively firm.
However, any renewed surge in oil prices linked to escalation in the US–Iran conflict could weigh on the Eurozone outlook and limit gains.
The Dollar is likely to remain highly sensitive to geopolitical headlines, with renewed escalation expected to trigger fresh safe-haven demand.
Markets will also focus on upcoming US CPI and labour market releases, alongside Eurozone inflation data and ECB speakers.
If tensions flare again and oil prices surge, the EUR/USD exchange rate could pull back towards 1.1700.
However, continued signs of diplomatic progress and softer US data could allow a move towards 1.1850.
Short-term range is expected between 1.1700 and 1.1850.
