EUR/USD struggles for direction on Tuesday as traders avoid taking directional positions ahead of the Federal Reserve’s (Fed) interest-rate decision on Wednesday while closely monitoring US-Iran developments.
At the time of writing, the pair trades around 1.1370 after hitting an intraday low of 1.1353, its lowest level since June 26
The Fed is widely expected to keep the federal funds rate unchanged at 3.50%-3.75%. However, traders see a small chance of a rate hike as elevated Oil prices keep inflation risks tilted to the upside. According to the CME FedWatch Tool, markets price in around a 30% probability of a 25-basis-point (bps) increase.
The US Dollar stays well supported by prospects of higher US interest rates, while lingering geopolitical risks provide additional support. The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, trades around 101.50, close to a one-month high. US President Donald Trump said Tuesday that it was a “good time for Iran to make a deal,” warning that the US would “go back and finish the job” if no agreement was reached.