Euro rallies as Iran ceasefire hopes crush the US Dollar

EUR/USD gains as oil slump fuels broad Dollar weakness

The base-case scenario for traders is that an agreement could be reached within days, after which discussions on a new Iran nuclear deal would begin. US equity futures climbed, while the Greenback is on the back foot, as shown by the US Dollar Index (DXY).

The DXY, which tracks the performance of the buck’s value against a basket of six currencies, is down 0.33% at 98.99, after ending the last week almost flat.

WTI, the US crude Oil benchmark, is plummeting nearly 5.50% to $91.66 per barrel, another reason for the Euro’s strength, as it is positively correlated with the Dollar.

The Eurozone and US economic docket is absent due to the holidays on both sides of the Atlantic, but several European Central Bank policymakers crossed the wires.

ECB’s Yannis Stournaras said that a temporary overshoot of the ECB’s inflation target might warrant cautious tightening. Martin Kocher of the Governing Council echoed his words, adding that a hike is necessary if 2% in the medium term is “unattainable.”

Last week’s economic sentiment in Germany improved, but the outlook looks weak, according to the Ifo Business Sentiment survey. Additionally, the European Commission foresaw that the Eurozone economic growth will slow to 0.9% in 2026 from 1.3% last year, and that inflation will rise to 3% from 1.9%, above the ECB’s 2% target.

Money markets have so far priced in two ECB interest rate hikes towards the end of the year, according to Prime Terminal data. The first increase is expected at the June 11 meeting, with odds standing at 77.64%.

Ahed this week the US economic docket will feature housing data, Durable Goods Orders, the Gross Domestic Product (GDP) second estimate for Q1 2026, jobs data and the Fed’s preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index.

Across the pond, the EU docket will feature speeches by ECB policymakers, the Business Climate and Consumer Confidence for May.

EUR/USD Price Forecast: Technical outlook

In the daily chart, EUR/USD trades at 1.1645. The pair sits just under the clustered simple moving average (SMA) triple at 1.1658, keeping the near-term tone broadly neutral and slightly capped while it trades above the reclaimed trend-line supports at 1.1573 and 1.1271. The Relative Strength Index (RSI) at 46 stays below the midline, hinting at modest downside risk but without strong momentum in either direction as price consolidates between underlying trend support and immediate moving average resistance.

On the topside, initial resistance is located at the SMA triple near 1.1658, with a subsequent barrier at the downward resistance trend line around 1.1813, which would need to give way to reopen a more constructive upside phase. On the downside, first support emerges at the rising trend line around 1.1573, ahead of a deeper structural floor at 1.1271, where failure would significantly weaken the broader technical backdrop.

(The technical analysis of this story was written with the help of an AI tool.)

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.