The EUR/USD pair experienced a slight decline during the North American session, hitting a daily low of 1.1804. This movement was influenced by a risk-off sentiment that supported the Greenback, particularly in light of ongoing tensions between the US and Iran. Currently, the pair is trading at 1.1845, reflecting a decrease of 0.07%. EUR/USD is currently in a consolidation phase as heightened tensions between the US and Iran bolster the strength of the Dollar. Robust US labor statistics and solid regional data diminish expectations for a dovish stance from the Federal Reserve. The disappointing German ZEW and a decline in Eurozone output are impacting the Euro’s future prospects.
Nuclear discussions between Tehran and Washington recommenced on Tuesday; however, both sides did not finalize an agreement. Nonetheless, progress has been noted, as reported. Despite this, tensions continue to escalate as the US has deployed a fleet to the Middle East, aiming to apply pressure on Iran for concessions. The economic docket in the US included jobs figures, business activity data from the New York Fed region, and speeches delivered by Federal Reserve officials. The ADP Employment Change 4-week average showed improvement, indicating strength in the labor market, with figures rising from a revised 7.8K to 10.3K, as reported. The New York Empire State Manufacturing Index in February decreased from 7.7 to 7.1, yet it surpassed expectations which anticipated a decline to 6.
In light of the fundamental backdrop and the robust US Nonfarm Payrolls report from last week, traders have been prompted to reduce their dovish positions regarding the Federal Reserve for the remainder of the year. According to data from Prime Market Terminal, investors have factored in 57 basis points of easing anticipated by the end of 2026. Federal Reserve officials have made their statements public. Mary Daly from the San Francisco Fed expressed a hawkish stance, indicating that inflation remains above the target level. Fed Governor Michael Barr indicated that neutral rates have experienced a slight increase, though not significantly, and emphasized that the Fed has the flexibility to proceed cautiously with monetary policy. Chicago’s Fed President Austan Goolsbee indicated that there has been some progress on inflation; however, he noted that if inflation remains persistently high, it would result in a looser policy than would typically be the case. He considers 3% to be a relatively neutral approximation.
In Europe, the core perspective remains largely consistent, as indicated by the German ZEW Economic Sentiment, which showed a decline in investor confidence in February following a five-year high in the preceding month. The ZEW Index decreased to 58.3, falling short of economists’ projections of 65.0. Additional data indicated that industrial production in the Eurozone experienced a decline of 1.2% year-over-year in December 2025, down from 2.2% in the prior month, and slightly under the anticipated figure of 1.3%. Overall, the EUR/USD appears set to decline, despite expectations that the Fed will cut rates by a minimum of 50 basis points, while the European Central Bank is likely to maintain its current rates.