Euro Gains Against US Dollar Amid Fluctuating Oil Prices
The euro (EUR) strengthened against the US dollar (USD) on Tuesday, benefiting from a slight drop in oil prices that led to lower US Treasury yields, creating headwinds for the greenback. As of now, EUR/USD is trading around 1.1701, bouncing back from an intraday low of 1.1676.
Even with this rebound, the potential for EUR/USD to rise seems somewhat restricted. Market mood remains precarious due to renewed conflicts in the Middle East, which may limit further declines in the USD. The US Dollar Index (DXY), which gauges the dollar’s strength against a collection of six major currencies, is hovering around 98.40, slipping about 0.07% for the day.
Recent reports indicating new attacks in the Gulf have raised concerns about the viability of the existing ceasefire. However, U.S. Defense Secretary Pete Hegseth noted on Tuesday that, despite increasing tensions in the Strait of Hormuz, the ceasefire with Iran is still intact. He mentioned that it would be up to U.S. President Donald Trump to determine whether the latest tensions amount to a breach of this ceasefire.
This statement eased worries about immediate spikes in oil prices, contributing to a decline in oil values, with West Texas Intermediate (WTI) down around 3% at the current moment.
Nonetheless, oil prices on the whole remain elevated, and inflation concerns linger, prompting speculation that major central banks may need to adopt a more aggressive approach. Traders are currently anticipating at least two interest rate hikes by the European Central Bank (ECB) this year. Still, given the eurozone’s vulnerability to energy shocks, there’s uncertainty surrounding the ECB’s ability to raise rates without hesitation.
François Villeroy de Galhout, a member of the ECB Governing Council, remarked on Tuesday that there aren’t yet “enough signs to raise rates,” although he added, “If we see the effects of the second round, we will raise rates.”
In the United States, while the Federal Reserve is expected to keep interest rates steady in the near future, the likelihood of an increase at its December meeting has climbed to about 27%, up from almost zero just a week prior, as noted by the CME FedWatch tool.
Traders were also absorbing the latest economic data from the U.S. The number of job openings as per the JOLTS report dipped to 6.866 million in March, slightly above the anticipated 6.83 million, but down from February’s figure of 6.922 million. Conversely, the ISM service PMI for April was recorded at 53.6, a slight decline from the previous month’s 54 and marginally below the market expectation of 53.7.
