Euro Seized the Opportunity to Rise

  • The US-Iran ceasefire sent EURUSD to 1.17.
  • The dollar will be sensitive to developments in the Washington-Tehran talks.

The US dollar was hit by a wave of selling following reports of a two-week truce between Washington and Tehran. And although Middle Eastern countries continue to report attacks by Iran, and Israel has no intention of halting its strikes on Lebanon, EURUSD recorded its best rally since late January. Investors, driven by FOMO (fear of missing out), briefly pushed the euro above 1.17.

Markets shoot first and ask questions later. The war had led to a rise in oil prices and the US dollar, whilst the EURUSD and US stock indices were steadily falling. The ceasefire turned yesterday’s winners into losers and the underdogs into favourites. The greenback is losing ground as tensions ease. At the same time, the futures market has raised the odds of a Fed rate cut in 2026 from 12% to 44%.

It is unclear whether Donald Trump has resolved the conflict in the Middle East. The differences between the opposing sides have not gone away. Iran claims victory in the conflict, whilst the US says it has achieved and even exceeded its objectives. For now, the markets are trying to work out whose claims are more misleading and are awaiting signals from the direct talks on 10 April.

It is widely known how Donald Trump conducts negotiations. The tactic of threats has not gone away, which could be perceived as an escalation of the geopolitical conflict and could prompt the EURUSD to pull back. Nevertheless, Iran and the US have already taken the first step, and, coupled with falling oil prices, this offers hope that the euro will continue to rise.

The fall in the dollar and US Treasury yields has allowed gold to recover. The precious metal has broken above $4,800 per ounce thanks to renewed hopes of a cut in the federal funds rate and the return of funds previously withdrawn to meet margin requirements on securities.

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