EUR/USD shows resilience, climbing to approximately 1.1540 in the early hours of Thursday. The ECB is anticipated to increase interest rates on Thursday. US initiates new military actions against Iran, heightening concerns about an extended conflict in the Middle East. The EUR/USD pair is positioned in positive territory close to 1.1540 during the early hours of trading in Asia on Thursday. Increased speculation surrounding a potential rate hike by the European Central Bank during its June policy meeting later today supports the Euro against the Greenback.
The ECB is expected to raise interest rates later today, as policymakers tackle the risk of second-round inflation impacts in the context of high energy prices. This marks the initial rate increase in a span of three years. Market participants will pay close attention to the ECB’s forecasts regarding inflation and economic growth. The market is anticipating three rate increases for the remainder of the year. Additionally, ECB President Christine Lagarde’s press conference may provide insights into whether the recent hike is a singular adjustment or if further tightening is anticipated within the year. Hawkish remarks from policymakers may bolster the shared currency in the short term.
Conversely, escalating tensions in the Middle East may strengthen a safe-haven currency like the US Dollar and pose challenges for the major pair. US Central Command announced that the US commenced strikes in Iran on Wednesday, stating that the attacks are “in response to Iran’s unwarranted and continued aggression.” Meanwhile, the Islamic Revolutionary Guard Corps announced that the Strait is “closed to all vessels, including oil tankers and commercial ships,” effective immediately, and “any vessel attempting to transit the strait will be targeted.”