Chart of the Day: EURUSD Under Pressure from the Fed, the Persian Gulf, and Inflation

The EURUSD pair remains under pressure, trading around 1.157–1.1580 USD per euro. Today’s movements are driven by a combination of monetary policy, geopolitical tensions, and macroeconomic data.

Source: xStation5

What is driving EURUSD today?

Monetary policy: Fed and ECB hold rates
The Fed kept interest rates in the 3.50–3.75% range, signaling that rates are expected to remain elevated for an extended period, with no cuts planned in the near term. The ECB left the deposit rate at 2.00%, emphasizing caution amid rising inflationary risks, mainly related to energy prices and geopolitical developments. Both institutions are operating in a “wait-and-see” mode, which limits short-term support for the euro.

Geopolitics and energy prices
Tensions in the Middle East are increasing risk aversion and supporting the US dollar as a safe-haven asset. Rising oil and natural gas prices are adding cost pressures on the eurozone economy. Any further escalation of the conflict could push EURUSD lower in the short term.

German PPI inflation readings and market expectations
This morning, German PPI data were released: -0.5% month-on-month and -3.3% year-on-year. These figures indicate a slowdown in cost pressures in the German economy before the recent surge in energy prices caused by the conflict. In practice, this means the reading does not yet reflect the potential additional inflationary impact of rising energy costs. Markets continue to closely monitor upcoming inflation data in the eurozone and the US, as energy shocks and tariffs could increase price pressures in the coming months.

Takeaways
EURUSD remains sensitive to monetary policy, geopolitical tensions, and energy price volatility. A strong US dollar, escalation of the Middle East conflict, and limited inflationary impulses in the eurozone keep the pair under pressure.