EUR/USD softens to near 1.1750 amid extended US‑Iran ceasefire
The EUR/USD pair trades in negative territory near 1.1750 during the early Asian session on Wednesday. The ongoing conflict between the United States and Iran, as well as uncertainty surrounding the Strait of Hormuz blockade, weighs on the Euro (EUR) against the US Dollar (USD). 
  • EUR/USD weakens to around 1.1750 in Wednesday’s early Asian session. 
  • Trump said he will extend the ceasefire with Iran until talks between the two countries have progressed. 
  • Iran's military warns of a powerful attack on predetermined targets in view of repeated threats by Trump.  

The EUR/USD pair trades in negative territory near 1.1750 during the early Asian session on Wednesday. The ongoing conflict between the United States and Iran, as well as uncertainty surrounding the Strait of Hormuz blockade, weighs on the Euro (EUR) against the US Dollar (USD). 

US President Donald Trump announced late Tuesday that he was extending a ceasefire with Iran indefinitely, a day before it was set to expire, even as plans for a fresh round of negotiations between the two countries fell apart.

Meanwhile, an aide to Iran’s top negotiator accused Trump of a “ploy to buy time” after the US President extended the temporary ceasefire. Iran's military warned of a powerful attack on predetermined targets in view of repeated threats by Trump.Uncertainty surrounding the US-Iran peace talks could boost a safe-haven currency such as the Greenback and create a headwind for the major pair in the near term. 

Traders will keep an eye on the preliminary readings of the HCOB Purchasing Managers’ Index (PMI) from the Eurozone and Germany, which are due on Thursday. If the reports show stronger-than-expected outcomes, this could provide some support to the shared currency. On the US docket, the S&P Global PMI data for April will be released on the same day. 

Euro FAQs

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%).

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.

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.

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.

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.

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