The Euro pares losses against the Dollar after a ceasefire deal eases geopolitical risks, though Fed rate hike bets cap gains.
EUR/USD climbed to 1.1470 on Friday, rebounding from a three-month low of 1.1417 as the US Dollar Index (DXY) retreated to 100.81. The pullback followed reports of a ceasefire agreement between Israel and Hezbollah, addressing a key demand under Iran’s 60-day memorandum of understanding.
Despite the relief rally, the Dollar remains supported by hawkish Fed expectations. The Federal Reserve held rates at 3.50%-3.75% this week but left the door open for further hikes amid rising inflation pressures, particularly from higher oil prices. Meanwhile, the Euro’s gains were limited despite ECB policymaker Pierre Wunsch hinting at another 25 bps hike in July if inflation data disappoints.
The pair is set to close the week lower, reflecting broader USD strength driven by monetary policy divergence between the Fed and ECB.