EUR

The euro closed March below $1.15, nearing its lowest point in nearly two weeks, after a volatile month marked by escalating tensions in the Middle East. The common currency lost over 2% against the dollar as traders assessed the economic impact of the deepening conflict. Adding to the uncertainty, a Wall Street Journal report revealed that US President Donald Trump had signaled a potential end to the US military campaign against Iran, even if the critical Strait of Hormuz remained largely blocked. Soaring oil prices fueled inflation across Europe, prompting markets to drastically revise their expectations for the European Central Bank’s policy.

Investors now anticipate at least two interest rate hikes in 2026, abandoning earlier forecasts of a 40% chance of a rate cut. While French central bank chief François Villeroy de Galhau reaffirmed the ECB’s commitment to curbing energy-driven inflation, he cautioned that it was “too early” to specify the timing of any rate adjustments.

EUR/USD finds support near 1.1450 after snapping a five-day losing streak.

US President Trump is willing to end the war with Iran, WSJ reported.

Investors await flash Eurozone HICP data for March.

The EUR/USD pair attracts bids after a five-day losing streak and edges higher to near 1.1475 during the Asian trading session on Tuesday. The major currency pair ticks up as the US Dollar (USD) edges down amid hopes of an end to the month-long war in the Middle East.

As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades slightly lower to near 100.40.

The expectations of peace in the Middle East war, which involves the United States (US), Israel, and Iran, have accelerated as President Trump has stated that he is willing to end the war, the Wall Street Journal (WSJ) reported. The report also shows that Trump is ready for peace despite the Strait of Hormuz remaining largely closed, as he doesn’t intend a forceful reopening to avoid stretching the military mission beyond his timeline of four to six weeks.

The continuous closure of the Hormuz, through which almost 20% of global energy is supplied, would limit the upside in the oil price, a scenario that will keep global inflation projections elevated. This could be the reason behind a slight downtick in the US Dollar, which should have faced intense selling pressure on peace hopes, as it rallied in the past few weeks due to hopes that de-anchored inflation expectations would discourage the Federal Reserve (Fed) from loosening the monetary policy in the near term.

Meanwhile, higher oil prices are expected to remain a key drag on the Euro (EUR), given that the Eurozone is an energy importer.

On the macro front, investors await the flash Eurozone Harmonized Index of Consumer Prices (HICP) data for March, which will be published at 09:00 GMT. The headline HICP is expected to have grown at a robust pace of 2.7% Year-on-Year (YoY) against the previous reading of 1.9%.

The euro held steady at $1.15 by the end of March, poised for a monthly decline of over 2% against the US dollar. Traders offloaded riskier assets as concerns mounted over the economic fallout from the escalating Middle East conflict, with reports suggesting thousands of US troops were preparing for a potential ground operation, despite Washington’s insistence that diplomatic talks with Iran were progressing. Investors also turned their attention to a wave of key economic data due this week, including March inflation flash estimates from Europe’s major economies. Market sentiment has shifted sharply on ECB policy, with traders now pricing in at least two interest rate hikes this year and a growing possibility of a third, abandoning earlier expectations of a 40% chance of a rate cut in 2026.

• EUR/USD rebounds as the US Dollar eases from intraday highs.
• Weak US consumer sentiment contrasts with rising inflation expectations.
• Markets reassess interest rate outlook amid elevated Oil prices and geopolitical risks.

EUR/USD edges higher on Friday after early weakness, as the US Dollar (USD) pulls back from intraday highs, offering some support to the Euro (EUR). At the time of writing, the pair trades around 1.1545, recovering from a daily low at 1.1501.

The pullback in the US Dollar appears largely technical, as buyers take a breather following a strong rally earlier this week that pushed the US Dollar Index (DXY) above the key 100.00 psychological level.

The index, which tracks the Greenback against a basket of six major currencies, is currently hovering near 99.85, reflecting a modest pause in upside momentum. However, it remains on track for weekly gains, staying broadly supported amid ongoing Middle East tensions.

On the data front, the University of Michigan figures came in weaker than expected. The Consumer Sentiment Index fell to 53.3 in March, down from the preliminary estimate of 55.5. The Consumer Expectations Index also declined to 51.7 from 54.1.

At the same time, inflation expectations moved higher. The 1-year outlook rose to 3.8% from 3.4%, while the 5-year expectation stayed at 3.2%.

Richmond Fed President Thomas Barkin said higher gasoline prices are weighing on consumer sentiment and could crowd out other spending. He added that even before the recent oil shock, progress on inflation was at risk of stalling. Barkin also noted that while the unemployment rate remains low, the labor market still feels fragile, highlighting risks to both sides of the Fed’s dual mandate.

On the geopolitical front, the lack of fresh headlines has kept trading conditions relatively calmer on Friday compared to earlier this week, when conflicting signals around potential US-Iran negotiations drove volatility. US President Donald Trump announced a delay in planned military strikes targeting Iran’s energy infrastructure. The deadline, initially set to expire on Friday, has now been extended by 10 days. 

However, with no clear signs of a resolution yet and the Strait of Hormuz largely closed, Oil prices remain elevated, continuing to fuel inflation concerns. This is prompting markets to reprice the interest rate outlook, with traders now pricing in 2-3 European Central Bank (ECB) hikes by year-end, while expectations for Federal Reserve (Fed) rate cuts are being trimmed, with some even seeing the possibility of a hike later this year.