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EUR/USD slips as USD firms on Middle East and Fed rate outlook

EUR/USD was around 1.1433 after easing from a one-week high near 1.1460, while the dollar benefited from safe-haven demand and Fed-hike odds for September.

Reported · Written up by our desk · Major Pairs

EUR/USD trimmed gains on Friday as the US dollar rebounded while traders digested fresh developments in the Middle East. The pair was trading around 1.1433, after earlier touching a one-week high near 1.1460 during the Asian session, according to FXStreet.

The moves came as the United States and Iran exchanged military strikes following attacks by Iran's Islamic Revolutionary Guard Corps on commercial vessels transiting the Strait of Hormuz earlier this week. Reuters reported that Qatari mediators were in Iran for talks aimed at creating conditions for broader negotiations, leaving markets in a more fluid risk environment.

FXStreet said the US dollar continued to draw safe-haven demand, with the US Dollar Index at about 100.85 after rebounding from an intraday low near 100.60. The outlook also reflected expectations the Federal Reserve will keep policy restrictive despite heightened inflation risks.

Market pricing is also weighing on the euro, with the CME FedWatch Tool indicating a 58% probability of a rate hike at the September meeting. FXStreet added that traders also expect the European Central Bank to raise interest rates later this year, while Societe Generale pointed to resistance in the 1.1475 to 1.1500 area and said a break below 1.1390 could revive a broader downtrend.

Latest closeEUR/USD 1.144 ▲0.3%|Dollar index 100.94 ▼0.1%

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