The EUR/USD pair extended its upside momentum on Tuesday, reaching a new weekly high near 1.1610, fueled by improving risk sentiment and a weakening US Dollar. The shift comes after US President Donald Trump confirmed a ceasefire agreement between Israel and Iran, reducing geopolitical uncertainty in the markets.
Dollar Weakens as Risk Appetite Returns
Investors moved away from safe-haven assets, including the US Dollar, following the de-escalation in Middle East tensions. As a result, the US Dollar Index (DXY) tumbled to around 98.10, down sharply from Monday’s two-week high of 99.42. The truce announcement spurred optimism, pushing EUR/USD higher as traders re-entered risk-sensitive assets.
Fed’s Dovish Tilt Pressures the Greenback
The Greenback also came under pressure after Federal Reserve Governor Michelle Bowman hinted at the possibility of an interest rate cut in July. Bowman stated that the Fed should “place more emphasis on downside risks to the labor market,” and signaled openness to policy easing as early as next month.
Following Bowman’s remarks, market odds for a July rate cut rose notably. According to the CME FedWatch Tool, the probability of a cut increased from 14.5% on Friday to 22.7% on Monday, further weighing on the Dollar’s appeal.
Eurozone Faces Economic Headwinds, Says ECB
In contrast, European Central Bank (ECB) officials have taken a cautious stance on the Eurozone outlook. ECB President Christine Lagarde, speaking before the European Parliament, warned that near-term growth prospects are weakening. She noted that recent survey data indicate subdued economic momentum and reiterated that downside risks to the Eurozone economy remain significant.
Lagarde also raised concerns about US tariff policy under President Trump, which could impact Eurozone exports and inflation stability. Despite these warnings, the Euro remained supported amid broad US Dollar weakness.
Currency Heatmap: Dollar the Weakest Performer
As of Tuesday morning, the US Dollar is the weakest among major currencies, showing the largest losses against the New Zealand Dollar (-0.66%), Australian Dollar (-0.61%), and Euro (-0.31%). This broad-based USD decline highlights the shift in market sentiment post-ceasefire.
| USD vs Others | EUR | GBP | JPY | CAD | AUD | NZD | CHF |
|---|---|---|---|---|---|---|---|
| % Change | -0.31% | -0.35% | -0.55% | -0.11% | -0.61% | -0.66% | -0.01% |
Outlook: Can EUR/USD Sustain Momentum?
The EUR/USD pair’s ability to hold above 1.1600 will depend on follow-through from US economic data and upcoming comments from Fed Chair Jerome Powell. Traders will also monitor developments around the ceasefire to assess its durability.
As it stands, the Euro is benefiting from the market’s shift away from the US Dollar, supported by easing geopolitical risk and a more dovish Fed outlook. A sustained move above 1.1610 could open the door toward the next resistance at 1.1675, while immediate support lies at 1.1540.
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