EUR/USD rose on Friday, influenced by recent geopolitical events related to the US-Iran conflict, which negatively impacted the US dollar while benefiting the euro. At the moment, the exchange rate is around 1.1768, close to its peak for the week.
Reports indicate that Iran has presented a new proposal via a Pakistani mediator in response to the recent changes made by the US, following the rejection of an earlier Iranian suggestion to postpone nuclear discussions. Details about this new proposal remain undisclosed. Additionally, Iranian state media noted that Foreign Minister Abbas Araghchi was updating regional players on Iran’s stance regarding the war’s resolution.
This development sparked optimism that peace negotiations might be on the horizon, despite the current stalemate. Consequently, oil prices slightly decreased from their recent highs, and the US dollar dropped to a two-week low. Interestingly, this decline in the dollar appears to be linked mainly to speculation about possible Japanese intervention in the foreign exchange market to manage the yen’s decline.
The US Dollar Index (DXY), which assesses the value of the dollar against six major currencies, is down approximately 0.22% for the day, trading around 97.88 as of now.
Turning to economic data, the results regarding US manufacturing activity were mixed. The ISM Manufacturing PMI for April remained steady at 52.7, the highest since August 2022, although it fell short of the anticipated 53.0. Conversely, the S&P Global U.S. Manufacturing PMI was revised upwards to 54.5 from an initial 54.0, showing an increase from 52.3 in March, marking the sector’s most significant growth since May 2022.
Traders are also analyzing remarks from central bank officials following the recent announcements by the Federal Reserve and European Central Bank (ECB) regarding interest rates. Dallas Fed President Laurie Logan expressed resistance to easing monetary policy, mentioning that the next move could be a rate increase or decrease. She emphasized the importance of clarity from the Fed to avoid misleading the market about future easing. Meanwhile, Minneapolis Fed President Neel Kashkari cautioned that substantial price shocks could threaten inflation expectations, indicating that a series of hikes might be necessary to uphold the Fed’s commitment to a 2% inflation target.
On the European front, ECB officials adopted a cautious tone. Governing Council member Madis Mueller stated that it is “increasingly likely” that a rate hike will be necessary. At the same time, the Central Bank of Ireland’s Governor, Gabriel Makhlouf, noted that Eurozone GDP indicators are signaling growth challenges in the short term, while also warning of rising inflation risks.
