Euro Weakens, Iran Risks Lift Dollar
The euro weakened against the US dollar in early Asian trading on Tuesday, with EUR/USD dropping to around 1.1645. Markets are again holding back risk as uncertainty in the Middle East remains unabated, despite signs of negotiations.
US President Donald Trump said he was postponing plans for new attacks on Iran, originally scheduled for Tuesday, after being asked by the leaders of Qatar, Saudi Arabia, and the United Arab Emirates, due to ongoing "serious negotiations." However, Trump also warned that the US is ready to resume large-scale attacks at any time if an acceptable agreement is not reached.
This tone has led markets to assess the risk of escalation as remaining open. In such situations, the dollar tends to find support as a safe-haven asset, which in turn pressures EUR/USD in the near term.
From the European side, comments from European Central Bank (ECB) officials provided limited support for the euro. ECB Governing Council member Yannis Stournaras said that moderate interest rate hikes could help curb inflation without causing significant economic damage, signaling a hawkish bias.
Market expectations also point to ECB tightening. A Reuters survey showed that around 85% of economists expect the ECB to raise the deposit rate by 25 basis points to 2.25% in June, up from "slightly over half" who expected this before the April meeting.
The EUR/USD's next move will be largely influenced by a combination of Iran headlines and the dollar's safe-haven response, as well as ECB policy signals. The market will be closely watching ECB Chief Economist Philip Lane's speech, scheduled to speak today, for clues as to how much inflation risks are deemed strong enough to warrant a rate hike. (asd)
Source: Newsmaker.id
