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EUR/USD eases as Middle East risk shifts focus back to the dollar

EUR/USD traded near 1.1408 after falling from an intraday high of 1.1449, while the US Dollar Index recovered from 100.65 to about 101.00.

Reported · Written up by our desk · Major Pairs

EUR/USD slipped on Monday as earlier gains faded, with trading swinging between risk-on and risk-off sentiment, FXStreet said. At the time of writing, the pair was around 1.1408, easing from an intraday peak of 1.1449.

FXStreet linked the move to shifting Middle East headlines amid a thin calendar, noting that Reuters reported mediators proposed a 10-day pause in strikes to support an interim US-Iran deal and both sides signaled openness to diplomacy. Sentiment turned cautious after a separate Reuters report said Yemen’s Iran-aligned Houthis declared an immediate naval blockade against Saudi Arabia.

As markets rotated back toward the dollar, FXStreet said the US Dollar Index, which tracks the greenback against a basket of six major currencies, rebounded to around 101.00 from an intraday low of 100.65. The report also pointed to oil rising to its highest level in more than a month after US and Iran fighting resumed earlier in July, keeping energy-driven inflation risks in focus.

Against that backdrop, FXStreet said investors expect the ECB and the Fed to maintain a tight policy stance, with the ECB widely expected to hold its Deposit Facility Rate at 2.25% on Thursday. It added that markets are pricing in an ECB rate hike by September and that CME FedWatch data put the probability of a Fed hike in September at about 63%.

Latest closeEUR/USD 1.145 ▼0.2%|Dollar index 100.71 ▲0.2%

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