The EUR/USD pair has declined to approximately 1.1400 during the early Asian trading session on Monday. The US military announced the initiation of another series of strikes targeting Iran. The US June CPI inflation report will attract significant attention on Tuesday. The EUR/USD pair declines to approximately 1.1400 in the early Asian session on Monday, influenced by increased geopolitical tensions in the Middle East. Federal Reserve Bank Governor Christopher Waller and European Central Bank policymaker Isabel Schnabel are scheduled to deliver remarks later today.
The US military reported that it conducted another series of strikes against Iran over the weekend, according to reports. The Islamic Revolutionary Guard Corps subsequently initiated retaliatory drone and missile strikes targeting US allies throughout the Middle East, encompassing Kuwait, Jordan, and Qatar. Iran’s Foreign Ministry on Sunday condemned US military attacks on Iran, accusing Washington of violating international law and warning neighbouring countries against aiding any military action against the nation.
Another escalation in the diplomatic breakdown between the US and Iran could enhance the appeal of a safe-haven currency like the Greenback, potentially serving as a headwind for the major pair. Traders have increased their positions on ECB rate hikes in recent days, prompted by indications that a potential agreement between Washington and Tehran to resolve the conflict may be at risk. The ECB raised interest rates at the June policy meeting, and markets anticipate two additional increases over the next year to mitigate the impact of the Iran war on energy prices.
The US Consumer Price Index inflation data is set to be released later on Tuesday. The headline CPI is anticipated to decrease by 0.1% month-over-month in June, whereas the core CPI is forecasted to increase by 0.3% in the same timeframe. Any signs of softening inflation in the US could reduce pressure on the Fed to hike interest rates, weighing on the USD.