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Euro pressured by stronger US Dollar amid uncertainty over US-Iran negotiations

  • EUR/USD remains under pressure as traders monitor developments surrounding US-Iran negotiations.
  • The US Dollar Index climbs to its highest level since April 7 amid safe-haven demand.
  • The latest PMI data highlighted growing economic weakness in the Eurozone, while US business activity remained comparatively stable.

The Euro (EUR) trades on the back foot against the US Dollar (USD) on Thursday, with EUR/USD easing from earlier intraday highs as price action remains driven by geopolitical headlines surrounding developments in the Middle East. At the time of writing, the pair is trading near six-week lows around 1.1585, easing from an intraday high of 1.1635.

The US Dollar continues to gain traction as traders remain skeptical about whether Washington and Tehran can reach an agreement to end the war and reopen the Strait of Hormuz. Iran’s nuclear program remains a major sticking point in negotiations with Washington.

The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is trading around 99.40, its highest level since April 7.

Adding to the uncertainty, Reuters reported earlier on Thursday, citing two senior Iranian sources, that Iran’s Supreme Leader had ordered that near-weapons-grade uranium must remain inside the country. However, Al Jazeera later reported that an Iranian official denied the claims.

The conflicting headlines added to volatility across financial markets, although diplomatic efforts between Washington and Tehran continue. Still, US President Donald Trump has maintained a hardline stance on Iran’s nuclear ambitions and warned that military action could resume if no agreement is reached.

Meanwhile, elevated Oil prices continue to fuel inflation concerns, prompting traders to increase bets that the Federal Reserve (Fed) could raise interest rates by the end of the year. The hawkish repricing is pushing US Treasury yields higher, with the benchmark 10-year Treasury yield holding near the 16-month highs touched earlier this week.

At the same time, rising energy prices remain a concern for the Eurozone economy due to the region’s heavy reliance on imported energy. Investors fear persistently high Oil prices could slow economic growth and limit the European Central Bank’s (ECB) ability to raise interest rates aggressively if inflation pressures continue to intensify.

On the data front, traders also digested the latest preliminary Purchasing Managers Index (PMI) data for May from both the Eurozone and the United States. The US Composite PMI held steady at 51.7 in May, while the Manufacturing PMI rose to 55.3 from 54.5 previously, marking a 48-month high. The Services PMI Business Activity Index eased slightly to 50.9 from 51 in April.

The Eurozone’s Composite PMI fell to 47.5 in May from 48.8 in April, marking a 31-month low. The Services PMI dropped to 46.4 from 47.6, its lowest level in 63 months, while the Manufacturing PMI eased to 51.4 from 52.2 previously, a three-month low.

Economic Indicator

Michigan Consumer Expectations Index

The University of Michigan's Inflation Expectations gauge captures how much consumers anticipate prices will change over the coming 12 months. It comes out in two rounds—a preliminary release that tends to pack a bigger punch, followed by a revised update two weeks later.

Read more.

Next release: Fri May 22, 2026 14:00

Frequency: Monthly

Consensus: 48.5

Previous: 48.5

Source: University of Michigan

Author

Vishal Chaturvedi

I am a macro-focused research analyst with over four years of experience covering forex and commodities market. I enjoy breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.

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