EUR\/USD traded lower near 1.1690 in early Asian trading on Friday, as the euro weakened against the US dollar. Trading was cautious over whether a fragile two-week ceasefire between the United States and Iran would continue.<\/p>\n
Iran\u2019s Foreign Ministry spokesperson Esmaeil Baghaei said on Thursday that talks to end the war depend on the US meeting ceasefire commitments. He said these include a ceasefire in Lebanon, which the US and Israel said was not part of the deal.<\/p>\n
US Vice President JD Vance and envoys Steve Witkoff and Jared Kushner are preparing for talks in Pakistan this weekend on a potential long-term deal with Iran. The two-week pause in hostilities has largely held.<\/p>\n
Tensions in the region continued after Israeli Prime Minister Benjamin Netanyahu said Israel will \u201ccontinue to strike Hezbollah with force\u201d. Ongoing uncertainty has supported demand for the US dollar.<\/p>\n
The US March CPI inflation report is due on Friday. Headline CPI is forecast at 3.3% year on year in March, up from 2.4% in February, linked to higher oil prices.<\/p>\n
In Europe, the ECB has signalled possible further tightening if price pressures persist. Markets have fully priced in two rate rises and show more than a 50% chance of a third by December, according to Reuters.<\/p>\n
We see the EUR\/USD pair facing downward pressure due to the fragile US-Iran ceasefire, which is boosting the US Dollar as a safe haven. This geopolitical uncertainty makes traders nervous, and they are moving capital into dollar-denominated assets for safety. The situation is a classic risk-off scenario that typically weighs on pairs like the EUR\/USD.<\/p>\n
The upcoming US Consumer Price Index report is the most important event today, with expectations of a sharp rise to 3.3% year-over-year. We saw a similar pattern throughout 2022, where hotter-than-expected inflation reports consistently triggered strong dollar rallies as the market priced in a more aggressive Federal Reserve. A high number today would almost certainly reinforce this trend and push the EUR\/USD lower.<\/p>\n
Given the binary risk of the CPI data, a sensible derivatives strategy would be to buy volatility. Purchasing an at-the-money straddle, which involves buying both a call and a put option, would allow a trader to profit from a large price swing in either direction following the announcement. Implied volatility for one-week EUR\/USD options has already surged to over 10%, indicating the market is bracing for a significant move.<\/p>\n
Beyond today, the stability of the Middle East remains a key factor that will support the dollar. The tense standoff reminds us of late 2024, when similar conflicts caused oil prices to spike and the Dollar Index (DXY) to rally from 104 to over 107 in just a few weeks. Should this ceasefire break down, we would expect a repeat of that safe-haven demand for the greenback.<\/p>\n
However, we must not ignore the increasingly hawkish European Central Bank, which is now expected to deliver at least two rate hikes this year. This policy divergence acts as a strong counterbalance and provides underlying support for the Euro. Looking back at the ECB’s aggressive rate-hiking cycle that began in 2022, we know they are capable of moving decisively to combat inflation, which could limit how far the EUR\/USD can fall.<\/p>\n
Therefore, traders might consider using the post-CPI volatility to establish positions for the coming weeks. A sharp drop in the pair following a high inflation number could present a buying opportunity for those betting on the ECB’s hawkish stance. Conversely, a spike on weak inflation data might be an opportunity to short the pair if one believes the geopolitical risks will ultimately dominate.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" EUR\/USD dipped near 1.1690 as Iran ceasefire uncertainty boosted dollar demand; US CPI awaited Friday.<\/p>\n","protected":false},"author":38,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[46],"tags":[],"class_list":["post-44600","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":[],"aioseo_notices":[],"featured_image_src":null,"featured_image_src_square":null,"author_info":{"display_name":"josephine","author_link":"https:\/\/www.vtmarketsglobal.com\/en\/author\/josephine\/"},"_links":{"self":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/44600","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/users\/38"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/comments?post=44600"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/posts\/44600\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/media?parent=44600"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/categories?post=44600"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarketsglobal.com\/en\/wp-json\/wp\/v2\/tags?post=44600"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}