EUR/USD Gains Slightly Amid US-Iran Ceasefire Hopes
EUR/USD gained limited ground and remained above 1.1500 on Monday, trading around 1.1520 in early European trading as risk appetite improved following news of US-Iran ceasefire talks.
The main trigger was a report that the US, Iran, and several regional mediators were pushing for a 45-day ceasefire as a first step toward a more permanent end to the war, although Reuters emphasized that it could not independently verify the Axios report.
However, the euro's gains remained limited as the US dollar still found safe-haven support amid uncertainty over the continuation of the war and the risk of energy disruptions, including the Strait of Hormuz issue, which has kept oil prices high and heightened inflation concerns.
Fundamentally, solid US employment data helped curb dollar weakness: nonfarm payrolls rose by 178,000 in March and unemployment fell to 4.3%, thus fading expectations of monetary policy easing and maintaining a high opportunity cost of holding the euro against the dollar. In Europe, the ECB emphasized its data-dependent approach and assessed that the war is increasing uncertainty, creating inflation risks from energy and the risk of a growth slowdown.
Looking ahead, the market will be paying attention to two main factors: the release of the US ISM Services PMI on Monday, which could change perceptions about the resilience of the US economy and the direction of interest rates, and the latest developments in ceasefire diplomacy ahead of the deadline related to the Strait of Hormuz, which could potentially affect energy prices and global risk sentiment. (Zaf)
