|

EUR/USD edges lower below 1.1800 on Iran ceasefire uncertainty

  • EUR/USD softens to around 1.1785 in Tuesday’s early Asian session. 
  • Iran's top negotiator says Tehran does not accept negotiations under threats. 
  • Markets expect the ECB to leave the rates unchanged in April.

The EUR/USD pair trades with mild losses near 1.1785 during the early Asian session on Tuesday. Traders continue to digest ongoing Middle East tensions ahead of the 14-day ceasefire expiration. The ZEW Survey from Germany and the Eurozone is due later on Tuesday. On the US docket, the US March Retail Sales report will be published. 

US President Donald Trump has given mixed messages on the way forward in the war against Iran, saying he’s in no rush to end the conflict. Trump also expressed optimism that a new round of negotiations with Tehran will soon take place in Pakistan as the 14-day ceasefire is set to expire on Wednesday.

On Tuesday, Iranian Parliament speaker Mohammad Bagher Ghalibaf said that Iran will not accept negotiations with the United States (US) while under threat, per the Guardian. Meanwhile, Iranian Foreign Minister Abbas Araghchi said that "continued violations of the ceasefire" ‌by the US are a major obstacle to continuing the diplomatic process.

Uncertainty surrounding US-Iran ceasefire talks could boost a safe-haven currency such as the US Dollar (USD) and create a headwind for the major pair. 

The European Central Bank (ECB) officials are leaning toward keeping interest rates unchanged at the April policy meeting. While a hold is expected in the April policy meeting, Barclays analysts anticipate the focus to shift toward potential 25 basis point (bps) hikes in June and September to combat an energy-driven inflation surge.

Euro FAQs

The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

Author

Lallalit Srijandorn

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

More from Lallalit Srijandorn
Share:

Editor's Picks

AUD/USD flatlines below 0.7050 as bulls await RBA rate decision on Tuesday

AUD/USD reverses an Asian session dip on Monday as renewed optimism over Iran diplomacy boosts investor confidence, keeping a lid on the safe-haven US Dollar and supporting the risk-sensitive Aussie. Spot prices, however, remain below the one-month high, touched last Thursday, as bulls wait for the crucial RBA decision before taking fresh positions.



USD/JPY advances to 157.75 as BoJ uncertainty weighs on the JPY

USD/JPY regains positive traction during the Asians session on Monday, building on Friday's bounce from sub-157.00 levels as the uncertainty over the timing of the next BoJ rate hike undermines the Japanese Yen. Meanwhile, hopes for Middle East diplomacy cap the safe-haven US Dollar and the currency pair amid speculation that authorities will step in to support the Japanese Yen.

Gold struggles to build on recovery from one-year low beyond $3,900

Gold kicks off the week on a positive note, recovering slightly from its lowest level since October 2025, touched on Friday, as hopes for Iran diplomacy cap the US Dollar. However, Fed rate-hike bets keep a lid on the non-yielding bullion as focus shifts to key US macro releases scheduled at the start of the new month, including the ISM Manufacturing later today and the NFP report on Friday.


Week ahead: Nonfarm Payrolls and US midterm elections take center stage
The US dollar traded higher against most of its peers this week, beginning the week on a solid footing amid expectations of a hawkish FOMC decision on Wednesday. Although market participants were convinced that a rate hike was off the table, they were on the lookout for clues and hints on whether they were correct in nearly fully pricing in a 25bps rate hike in December.
Middle East War updates: Iran warns of expanded strikes against US despite progress in talks

Here’s a brief recap of the key developments in the Middle East war that occurred over the weekend, which are expected to have a significant impact on markets in the upcoming week.

The 2% inflation target came from a throwaway remark. It now moves trillions
The Federal Reserve's 2% inflation goal grew out of an off-the-cuff remark by a New Zealand politician in 1988. Bond investors still price long-term US debt as if 2% holds, so a change in how the Fed measures inflation would move markets.