EUR/USD slides below 1.1500 as Trump’s Iran comments lift the US Dollar
- EUR/USD breaks 1.1500 support as US President Donald Trump demands Iran’s “unconditional surrender”.
- Trump has reiterated that Iran should “make a deal now” to avoid total destruction.
- The US Dollar rebounds as the Greenback benefits from its safe-haven appeal.
EUR/USD slipped below the key 1.1500 level on Monday, retreating from recent highs as geopolitical risks drove demand for the US Dollar.
At the time of writing, EUR/USD is trading near 1.1481, with intraday losses nearing 0.70%
The move followed comments from US President Donald Trump, who called for Iran’s “unconditional surrender” on Tuesday and warned Tehran to dismantle its nuclear program or face escalating consequences.
He praised Israeli airstrikes as “excellent” and “very successful,” warning that future operations could be “even more brutal,” and urged Tehran to “make a deal now” or face total defeat.
Speaking earlier aboard Air Force One after departing the G7 summit, Trump made clear he was not seeking a ceasefire but a “real end” to Iran’s nuclear ambitions, saying, “They should have done the deal… I’m not too much in the mood to negotiate.”
Earlier in the day, he called on civilians to “immediately evacuate Tehran,” claiming that US and Israeli forces now had “complete and total control of the skies over Iran.” In a pre-dawn statement, Trump revealed that the US knows where Iran’s Supreme Leader is hiding but was “not going to take him out—at least not for now.”
The day had started with a softer tone, as Trump expressed hope that “Israel and Iran can strike a deal,” though he added that “sometimes countries have to fight it out first.”
He also urged civilians to evacuate Tehran, signaling the potential for increased military action. These remarks rattled markets and spurred risk-off flows, prompting traders to favor the Dollar and weigh on the Euro despite otherwise supportive data from the Eurozone.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
Author
Tammy Da Costa, CFTe®
FXStreet
Tammy is an economist and market analyst with a deep passion for financial markets, particularly commodities and geopolitics.
