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EUR/USD pares gains as renewed Iran risk boosts the US dollar

The euro fell from 1.1418 to around 1.1373, while the dollar index rebounded to about 101.46 as oil remained under pressure and Fed rate expectations held.

Reported · Written up by our desk · Major Pairs

EUR/USD reversed early gains and traded around 1.1373 as geopolitical concerns resurfaced after a brief pause in attacks between the United States and Iran. The currency pair initially rose on improved risk sentiment, but the rebound proved short-lived as US officials said military action against Iran had not been ruled out, and Iran said the Strait of Hormuz remained closed with no direct talks with the US.

FXStreet said US officials and Iranian statements kept risk factors active, limiting downside for both the US dollar and oil. The US Dollar Index, which tracks the greenback against a basket of six major currencies, traded near 101.46, recovering from an intraday low of 101.12, while softer-than-expected US Durable Goods Orders did little to derail the dollar’s move.

Oil prices also influenced the FX tape. West Texas Intermediate traded around $83.20 per barrel after rebounding from $81.28, but it was still down more than 6% on the day, which helped frame ongoing inflation risks.

The next key catalyst is the Federal Reserve decision on Wednesday. FXStreet noted that while rates are widely expected to be left unchanged, traders still priced in a 33% chance of a hike, with the probability of an increase in September near 79%, while Europe looks ahead to Eurozone Core HICP data due on Friday.

Latest closeEUR/USD 1.137 ▼0.3%|Dollar index 101.47 ▲0.0%

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