Geopolitical tensions and Fed rate hike expectations limit the euro’s upside despite a softer US dollar and ECB rate hike bets.
The EUR/USD pair trades modestly higher, up over 0.10% near 1.1600, as the US dollar softens following a truce between Israel and Lebanon. Profit-taking after the dollar’s recent rally to April highs also supports the euro’s slight gains.
Expectations of a European Central Bank rate hike later this month provide additional support for the shared currency. However, persistent US-Iran tensions and renewed Middle East hostilities keep geopolitical risks elevated, capping further upside for the EUR/USD pair.
Hawkish Federal Reserve expectations, fueled by inflation concerns linked to high oil prices, limit the dollar’s losses. Traders remain cautious, avoiding aggressive bets on a significant euro rally amid uncertainty over US monetary policy and geopolitical developments.