EUR/USD is trading in a stable manner around 1.1445 during the early European session on Friday. Iran instructed the Houthis to obstruct the Red Sea oil route should the United States target the power network. Rising tensions in the Middle East have led to an increase in crude oil prices, causing markets to speculate on a potential rate hike by the ECB in September. The EUR/USD pair remains stable at approximately 1.1445 in the early Asian session on Friday. Market participants are actively analysing the implications of the ongoing conflicts in the Middle East. The preliminary reading of the Michigan Consumer Sentiment Index for July is set to be released later on Friday. On Thursday, a source indicated that Iran has requested Yemen’s Houthi militia to prepare to obstruct the Red Sea oil route should the United States conduct strikes on Iranian power infrastructure, thereby presenting a significant new risk to global energy supplies.
Meanwhile, the Tasnim news agency reported an additional explosion in Bandar Abbas, Qeshm, and Ahvaz. Significant explosions reverberated across Kuwait, with the auditory impact extending to Basra. Earlier this week, US President Donald Trump issued a warning regarding potential military action against Iran’s infrastructure, specifically targeting bridges and power plants, should the nation fail to engage in diplomatic discussions in the coming week. Signs of escalating tensions in the Middle East could bolster a safe-haven currency such as the US Dollar and present challenges for the major pair in the near term. Across the pond, the European Central Bank is anticipated to maintain interest rates next Thursday; however, a second hike this year is projected for September as a resurgence in energy prices heightens the risk of intensified inflationary pressures, according to sources.
Fed’s Cook presents a slightly more hawkish stance, as indicated by the 6.4/10 FXS Speechtracker score, which sits marginally above the 6.3/10 historical average, suggesting a continuation of current policies rather than a shift in direction. The emphasis that one month of softer CPI and PPI “does not make a trend,” combined with the description of policy as only “mildly restrictive” and a willingness to wait “a bit more time” while remaining ready to act if disinflation stalls, reinforces a patient but vigilant stance that tends to underpin the Dollar. References to AI-driven investment, anchored inflation expectations contingent upon suitable policy, and upside risks stemming from tariffs and geopolitical tensions further shift the balance of risks towards enduring policy firmness.
The FXS Fed Sentiment Index increased by 0.20 points to 126.33, indicating that the speech pushed overall Fed rhetoric further into hawkish territory. With the index significantly exceeding the neutral 100 mark and the FXS Speechtracker score marginally above the established baseline, Cook’s remarks align with a Federal Reserve that is not in a hurry to implement easing measures, creating a context that typically favours the Dollar over the Euro and Yen.