EUR/USD drifts higher to near 1.1575 in the early Asian session on Friday. The ECB announced a quarter-point rate hike on Thursday, raising its deposit facility rate to 2.25%. Trump announced the cancellation of proposed military strikes against Iran. The EUR/USD pair strengthens to approximately 1.1575 in the early hours of Asian trading on Friday. The Euro edges higher against the US Dollar on the European Central Bank interest rate hike and improved risk sentiment.
As widely anticipated, the ECB has opted to increase the key interest rates for the first time since 2023, in response to rising energy costs due to the escalation of conflict in Iran. The deposit facility rate has been raised from 2.0% to 2.25% following the governing council meeting on Thursday. The ECB has increased its main refinancing operations rate to 2.40% and its marginal lending facility rate to 2.65%. “The war in the Middle East is generating inflation pressures, and the decision to raise rates is robust across a range of scenarios mapping out how the shock might evolve and affect the medium-term outlook for the euro area,” stated ECB President Christine Lagarde.
Signals of a US-Iran peace deal have enhanced risk sentiment, thereby bolstering the shared currency. US President Donald Trump announced that he had halted new military strikes on Iran on Thursday, as negotiators are nearing a consensus on the final components of a deal. Nonetheless, the uncertainty remains elevated, and any indications of escalating tensions between the US and Iran could strengthen a safe-haven currency like the Greenback, thereby posing a challenge for the major pair.