EUR/USD is experiencing slight increases, hovering around 1.1635 during the early hours of Tuesday’s Asian session. Renewed tensions in the Middle East may exert pressure on the Euro, given its status as a riskier asset. ECB’s Schnabel cautioned that the shock can no longer be overlooked. The EUR/USD pair shows slight increases near 1.1635 in the early Asian session on Tuesday. Nonetheless, the potential upside may be constrained, as Iran has declared a cessation of US negotiations and a complete closure of the Strait of Hormuz, which could trigger risk-off sentiment. The preliminary reading of the Harmonised Index of Consumer Prices from the Eurozone is set to be released later on Tuesday.
Iranian negotiators will cease communication with the United States through intermediaries, and Iran will proceed to completely close the Strait of Hormuz, in response to continuous ceasefire violations, according to reports. US President Donald Trump stated on Monday that he reached out to Israeli Prime Minister Benjamin Netanyahu, urging him to refrain from executing a significant raid on Beirut, resulting in Israeli troops being redirected. However, Netanyahu contradicts Trump, emphasising that he will persist in operations against Hezbollah in Southern Lebanon. Escalating conflicts in the Middle East may strengthen a safe-haven currency like the US dollar and pose challenges for the major pair.
Across the pond, the assertive position of the European Central Bank may offer some backing to the shared currency. ECB executive board member Isabel Schnabel stated on Monday that the central bank can no longer ignore the inflationary effects stemming from the conflict in Iran, noting that price pressures have extended beyond the energy sector and the risk of unanchored inflation expectations has increased.