EUR/USD trades flat on Monday as the US Dollar (USD) steadies and markets settle into a calmer tone following the sharp volatility triggered by the US Treasury’s surprise buyback announcement last week.
At the time of writing, the pair trades around 1.1670, hovering near levels last seen in mid-May
The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is attempting to reclaim 99.00, trading around 98.95. Despite some near-term stabilization in the Greenback, the broader backdrop remains fragile after the Treasury’s decision revived concerns over US fiscal policy and rising government debt. Trading is relatively subdued on Monday as investors adopt a wait-and-see approach ahead of the first major risk event of the week.
The United States is preparing to announce a fresh package of sanctions against Iran later on Monday, which Treasury Secretary Scott Bessent has described as an “economic D-Day.” Iran has maintained a hard stance in response, with Foreign Ministry Spokesperson Esmaeil Baghaei saying that “Iran will use all its bilateral capabilities to confront US economic sanctions.” Later this week, the focus shifts to the US Personal Consumption Expenditures (PCE) Price Index on Wednesday. Another soft inflation reading, following the recent moderation in CPI and PPI, could strengthen expectations that the Federal Reserve (Fed) will leave interest rates unchanged in September and put fresh pressure on the US Dollar. Fed Chair Kevin Warsh’s remarks at the Jackson Hole Symposium on Friday will provide another test for those expectations.