Rising crude prices and geopolitical tensions bolster the USD, offsetting recent Fed rate hike doubts and capping EUR gains.
The EUR/USD pair remains steady around 1.1575-1.1580 in early Asian trading, halting a pullback from its two-month high. A modest USD rebound, driven by inflation concerns tied to surging oil prices, tempers optimism over the pair’s recent rally from July’s 1.1350 lows.
Last week’s softer US inflation and weak consumer spending data had eased expectations for near-term Fed rate hikes, pushing the USD Index (DXY) to its lowest level since mid-June. However, crude oil’s rise to a two-week high revives inflation fears, potentially forcing the Fed to maintain a hawkish stance. Geopolitical risks, including US-Iran tensions, further support the safe-haven USD.
President Donald Trump’s threat to declare the Strait of Hormuz as US territory and refusal to extend the Iran MoU have heightened regional instability, lifting oil prices and reinforcing bets on a Fed rate hike by year-end.