Euro weakens as ECB stays on hold, while Iran war boosts US Dollar

EUR/USD trades around 1.1385 on Thursday, down 0.26% on the day following the European Central Bank's policy decision.
The ECB keeps its three key interest rates unchanged, as widely expected, while reiterating its data-dependent approach.
The US Dollar strengthens on renewed safe-haven demand amid escalating attacks between the United States and Iran.

Ghiles Guezout FXStreet

EUR/USD trades around 1.1385 on Thursday after the European Central Bank (ECB) left its key interest rates unchanged, in line with market expectations. Following its July policy meeting, the central bank kept the main refinancing rate at 2.4%, the marginal lending facility rate at 2.65% and the deposit facility rate at 2.25%.

In its policy statement, the ECB said that the outlook for energy prices remains highly volatile and that the full inflationary impact of the recent energy shock has yet to materialize. The central bank reiterated that monetary policy decisions will continue to be taken on a meeting-by-meeting basis, guided by incoming economic data, the inflation outlook and the strength of monetary policy transmission. The ECB also stressed that it is not pre-committing to any particular interest rate path.

Despite the policy hold, the Euro (EUR) remains under pressure against the US Dollar (USD). The Greenback is benefiting from renewed safe-haven demand following a fresh escalation in the United State's (US) war on Iran. The US carried out strikes against Iran for the 12th consecutive night, while Tehran retaliated by targeting US military bases in Jordan and Bahrain.

Tensions have also intensified in energy markets. After disruptions in the Strait of Hormuz, attacks by Yemen's Ansar Allah on two Saudi Oil tankers in the Red Sea are now threatening traffic through the Bab el-Mandeb Strait. Against this backdrop, West Texas Intermediate (WTI) US Oil trades around $89.50 per barrel, up roughly 28% so far this month.

The sharp rise in energy prices is adding to inflation concerns in the United States and strengthening expectations that the Federal Reserve (Fed) may need to tighten monetary policy. According to the CME FedWatch Tool, markets are now pricing in a 78% chance of a rate hike at the September meeting, up from 52% one week ago.

The US Dollar is also drawing support from comments by US Secretary of State Marco Rubio, who warned that military strikes against Iran could intensify as long as Tehran refuses to negotiate, while also urging the Houthis to halt their attacks. This heightened geopolitical uncertainty continues to support safe-haven flows into the Greenback, limiting EUR/USD's ability to recover.

Euro Price Today

The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the New Zealand Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.24%	0.21%	0.26%	-0.04%	0.21%	0.63%	0.28%
EUR	-0.24%		-0.02%	0.04%	-0.30%	-0.03%	0.40%	0.04%
GBP	-0.21%	0.02%		0.04%	-0.28%	-0.02%	0.42%	0.06%
JPY	-0.26%	-0.04%	-0.04%		-0.31%	-0.07%	0.35%	0.00%
CAD	0.04%	0.30%	0.28%	0.31%		0.24%	0.67%	0.32%
AUD	-0.21%	0.03%	0.02%	0.07%	-0.24%		0.44%	0.09%
NZD	-0.63%	-0.40%	-0.42%	-0.35%	-0.67%	-0.44%		-0.37%
CHF	-0.28%	-0.04%	-0.06%	-0.00%	-0.32%	-0.09%	0.37%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).

Author

Ghiles Guezout

FXStreet

Ghiles Guezout is a Market Analyst with a strong background in stock market investments, trading, and cryptocurrencies. He combines fundamental and technical analysis skills to identify market opportunities.

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