Geopolitical risks in the Middle East drive demand for the US Dollar, offsetting stronger Eurozone economic sentiment data.
EUR/USD declined to around 1.1405 on Tuesday, nearing a one-week low, as the US Dollar strengthened amid escalating Middle East tensions. The US Dollar Index (DXY) rose to 101.15, extending gains for a fourth consecutive day.
Eurozone Economic Sentiment surged to 23.4 in July from 9.5 in June, surpassing forecasts of 11.2. Germany’s Economic Sentiment Index also climbed to 26.3, well above the expected 18. Despite the upbeat data, the Euro failed to gain traction.
Military exchanges between the US and Iran disrupted energy shipments through the Strait of Hormuz, pushing oil prices higher and raising inflation concerns. Traders now expect the ECB and Fed to maintain tighter monetary policy, with potential rate hikes if inflation pressures persist.