EUR/USD steadies below 1.1550 with Iran tensions in focus

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The EUR/USD pair flat lines around 1.1540 during the early Asian session on Tuesday. The major pair steadies as traders monitor US President Donald Trump's deadline regarding the Strait of Hormuz. The US Durable Goods Orders and ADP Employment reports are due later on Tuesday.

EUR/USD holds steady near 1.1540 in Tuesday’s early Asian session.
Trump renewed the threat of attacks on bridges and power plants.
US ISM Services PMI declined to 54.0 in March, below the consensus.

US President Donald Trump said on Monday that the latest proposal for a US ceasefire with Iran is “not good enough.” He threatened to target Iran's power plants and bridges on Tuesday if the strategic waterway is not reopened, setting a precise deadline of 8 p.m. Eastern Time (00:00 GMT Wednesday).

Traders take stock of the escalating Iran war, with all eyes on the latest deadline ‌from Trump to reopen the Strait of Hormuz. Any signs of escalating tensions could boost a safe-haven currency such as the US Dollar (USD) and create a headwind for the major pair.

Data released by the Institute for Supply Management (ISM) on Monday showed that the Services PMI eased to 54.0 in March from 56.1 in February. This reading came in weaker than the expectations of 55.0 and signaled some loss of momentum in the sector.

A hawkish tone from the European Central Bank (ECB) could support the shared currency. Markets are now pricing in 2–3 interest rate hikes for 2026 due to surging energy-driven inflation, a significant shift from previous expectations of holding rates.

Euro FAQs

What is the Euro?

The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

What is the ECB and how does it impact the Euro?

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

How does inflation data impact the value of the Euro?

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

How does economic data influence the value of the Euro?

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

How does the Trade Balance impact the Euro?

Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.