EUR/USD shows slight upward movement around 1.1725 during the early hours of Tuesday’s Asian session. Iran has proposed to restore access to the Strait of Hormuz contingent upon the lifting of the US blockade and the conclusion of hostilities. Market participants prepare for the upcoming rate decisions from the Fed and ECB on Wednesday and Thursday, respectively. The EUR/USD pair is experiencing slight upward movement, currently positioned at 1.1725 in the early hours of the Asian session on Tuesday. Nonetheless, the possible gains could be constrained as market sentiment continues to be delicate, influenced by the impasse in US-Iran peace negotiations. Market sentiment may become more reserved in anticipation of the upcoming interest rate decisions from the US Federal Reserve and the European Central Bank later this week.
Iran has proposed to reopen the Strait of Hormuz contingent upon the US lifting its blockade and ceasing hostilities, suggesting a delay in talks regarding its nuclear program, according to reports. It appears that US President Donald Trump is not inclined to accept the proposal, while US Secretary of State Marco Rubio has seemingly dismissed any agreement that does not address Iran’s nuclear program. The persistent tensions between the US and Iran, along with the potential closure of the Strait of Hormuz, may enhance the appeal of a safe-haven currency like the US dollar, potentially creating challenges for the major currency pair.
The Federal Reserve is anticipated to hold interest rates steady during the forthcoming April policy meeting on Wednesday, keeping the federal funds target range at 3.50% to 3.75%. This would signify the third consecutive pause. Market participants are looking forward to Jerome Powell’s press conference following the policy meeting for new insights. If Powell maintains a prolonged higher interest rate approach or indicates that further rate increases are possible, this may support the strength of the Greenback in the short term.
Economists across the pond expect the ECB to maintain its current stance at the upcoming meeting on Thursday, keeping the benchmark deposit rate steady at 2.0%, a level it has held since June of the previous year. Policymakers may consider a cautious stance as they navigate the significant economic uncertainty stemming from the ongoing conflict in the Middle East. Martins Kazaks, an official from the ECB, remarked last week that “we still have the large luxury of collecting data and forming our view.”