Euro dips below 1.1600 with the focus shifting to Fed's Warsh swearing-in ceremony

EUR/USD extends lows below 1.1600, and nears six-week lows at 1.1584.
Uncertainty about the outcome of the US-Iran peace negotiations is weighing on risk appetite.
The US Dollar picks up ahead of Kevin Warsh's swearing-in ceremony.

Guillermo Alcala FXStreet

The Euro (EUR) extends losses against the US Dollar (USD) on Friday, right below 1.1600 at the time of writing and nearing six-week lows, at 1.1584. Contradicting messages from the Middle East overshadow a string of fairly upbeat German macroeconomic data, while the focus now shifts to the swearing-in ceremony of the next Federal Reserve Chairman, Kevin Warsh.

Risk appetite remains subdued on Friday as Tehran mulls the latest peace proposal submitted by the US. Investors are sceptical, as the stances on Iran’s nuclear activities and control of the Strait of Hormuz remain far apart, but comments by US Secretary of State Marco Rubio, highlighting “some progress” in the talks with Tehran, are keeping hopes alive.

On the macroeconomic front, data from Germany were supportive for the Euro. The final Q1 Gross Domestic Product (GDP), released earlier on Friday, confirmed that the economy grew at a 0.3% pace, steady from the last three months of 2025, while the annualised GDP was revised up to 0.4% from the previously estimated 0.3% growth.

Also on Friday, the CESifo Group revealed that the German IFO Business Climate Index improved to 84.9 in May, from an upwardly revised 84.5 in April, against expectations of further deterioration, to 84.2. Likewise, the sentiment about the current economic situation and the expectations for the next six months have improved beyond expectations, soothing concerns about the impact of the Middle East conflict on the Eurozone’s leading economy.

The US Dollar, on the other hand, is picking up heading into the swearing-in ceremony of former Federal Reserve (Fed) Governor Kevin Warsh as the central bank's Chairman. Warsh has a challenging task ahead, having to cope with the Bank's commitment to keep a fast-rising inflation under control, and Trump's pressures to ease interest rates. Before that, the Michigan Consumer Sentiment Index is expected to confirm that sentiment among US consumers fell to historic lows at 48.2 in May.

Economic Indicator

Michigan Consumer Sentiment Index

The Michigan Consumer Sentiment Index, released on a monthly basis by the University of Michigan, is a survey gauging sentiment among consumers in the United States. The questions cover three broad areas: personal finances, business conditions and buying conditions. The data shows a picture of whether or not consumers are willing to spend money, a key factor as consumer spending is a major driver of the US economy. The University of Michigan survey has proven to be an accurate indicator of the future course of the US economy. The survey publishes a preliminary, mid-month reading and a final print at the end of the month. Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.

Why it matters to traders?

Consumer exuberance can translate into greater spending and faster economic growth, implying a stronger labor market and a potential pick-up in inflation, helping turn the Fed hawkish. This survey’s popularity among analysts (mentioned more frequently than CB Consumer Confidence) is justified because the data here includes interviews conducted up to a day or two before the official release, making it a timely measure of consumer mood, but foremost because it gauges consumer attitudes on financial and income situations. Actual figures beating consensus tend to be USD bullish.

Economic Indicator

Fed Chair Warsh swearing-in ceremony

US President Donald Trump swears in Kevin Warsh as the next Federal Reserve (Fed) chair at the White House. Warsh will become the central bank's 17th chair and succeed Jerome Powell, who is serving in a temporary capacity after his official leadership term ended on May 15.

AUD/USD holds above 0.6950 as bullish USD caps gains

AUD/USD edges lower during the Asian session on Tuesday, stalling a two-day recovery move from a two-month low, touched last week. An extended rout in the fixed income market keeps US bond yields elevated near multi-year highs. This, along with geopolitical uncertainties, helps the US Dollar retain its bullish tone despite receding October Fed hike bets. However, expectations for another RBA rate hike this month could act as a tailwind for the Aussie.

USD/JPY rises back above 158.00 despite hawkish BoJ outlook

USD/JPY rises back above 158.00 in the early European morning on Tuesday. The pair strengthens as the Japanese Yen fails to find any inspiration from hawkish BoJ expectations and looming intervention risks. Meanwhile, geopolitical uncertainty and elevated US bond yields keep the US Dollar near its YTD high despite receding October Fed hike bets. This, in turn, helps the pair stay supported.

Gold recovers further from two-month low amid some USD profit-taking

Gold builds on its modest intraday bounce from the $4,100 neighborhood, or a two-month low, and climbs above $4,150 during the first half of the European session. The US Dollar pauses for a breather following the recent strong rally from the September monthly swing low and offers some support to the precious metal. Adding to this, receding bets on an October Fed rate hike benefit the non-yielding bullion.

Ripple and Stellar weaken as derivatives positioning fades

Ripple (XRP) and Stellar (XLM) face pressure trading below $1.499 and $0.220, respectively, on Tuesday after a modest correction at the start of the week. Traders should be cautious as weakening derivatives metrics and fading bullish momentum suggest further corrections for XRP and XLM. Derivatives data shows a weakening and cautious signal among traders.

Europe in focus as French and Spanish politics drive sentiment

There are no tier-1 releases today. Focus will remain on developments in the European markets and geopolitical developments in the Middle East. In France, the key issue in the coming days will be whether the Socialists and Marine Le Pen's National Rally signal they are willing to topple the government over the budget.

Eurozone inflation just hit 3.8%, its highest in three years. This chart shows why the ECB can’t simply hike its way out

The ECB would normally have a relatively straightforward answer to inflation running almost twice its target: raise interest rates. But these are not normal circumstances. This time, the bond market is already doing part of the tightening for it, leaving the ECB facing an increasingly difficult dilemma.