EUR/USD records slight increases around 1.1405 during the early hours of Wednesday’s Asian session. Increasing energy expenses may reignite inflationary pressures and bolster the argument for additional tightening measures by the ECB. Trump downplayed the likelihood of prompt negotiations with Iran as the United States continues its assaults on the nation for the 11th consecutive night. The EUR/USD pair is experiencing slight upward movement, currently positioned at 1.1405 in the early hours of the Asian trading session on Wednesday. A hawkish tone from the European Central Bank lends support to the Euro in its exchange rate against the US Dollar. Traders are poised for the forthcoming decision on interest rates by the ECB this Thursday.
European government bonds experienced an uptick earlier this week, driven by a sustained geopolitical oil shock and the imminent risk of ongoing inflation. This environment has led investors to adjust their expectations towards a more hawkish trajectory for ECB monetary policy. While the ECB is widely expected to maintain its deposit rate at 2.25% during its July policy meeting on Thursday, money markets have indicated a rise in the ECB deposit rate to 2.66% in December and 2.73% in February 2027, an increase from the current 2.25%.
According to source, the interest rate increase in September has been fully priced in. Meanwhile, US President Donald Trump downplayed the likelihood of prompt negotiations with Iran as both parties engaged in reciprocal strikes, while Houthi militants in Yemen posed threats to shipping in the Red Sea. Trump pledged on Tuesday to take action if the Iran-backed group interfered with that waterway, though he did not detail the nature of his response.
Iran’s leading joint military command has indicated that Tehran will broaden its military operations and aim at the interests of the United States and its allies throughout the region should the US launch attacks on Iran’s nuclear facilities, according to the source. Escalating tensions in the Middle East could enhance the appeal of a safe-haven currency like the Greenback, potentially serving as a headwind for the major pair in the near term.