The US Dollar experienced volatility and modest losses against both the Euro and the Indian Rupee following US airstrikes on Iranian military infrastructure in retaliation for attacks on commercial vessels in the Strait of Hormuz, a critical chokepoint for global energy supply [2][3]. The EUR/USD pair traded around 1.1410 during Asian hours on Wednesday, maintaining minor gains after previous losses, as traders awaited the release of the US Federal Reserve Meeting Minutes under new Chairman Kevin Warsh for clues on future US interest rates [2]. According to United Overseas Bank’s Quek Ser Leang, EUR/USD momentum has faded, with the pair expected to oscillate between 1.1360 and 1.1450 in the coming weeks, and intraday price action may test 1.1390 without threatening the more important 1.1360 support unless the 1.1430 resistance breaks [1].
Geopolitical tensions have heightened after US airstrikes, with Iranian officials warning of a 'crushing military response' and reaffirming their intent to block US interference in the Strait of Hormuz [2][3]. The conflict has contributed to elevated oil prices, with the MCX Crude Oil contract expiring July 20 up 2.62% to near 6,882, following a 2.35% gain on Tuesday [3]. Despite rising oil prices, the Indian Rupee edged higher against the US Dollar, with USD/INR falling to near 95.00 and holding a neutral bias as spot corrected to the 20-day EMA [3].
Market participants are closely watching the Federal Open Market Committee (FOMC) minutes, set to be published at 18:00 GMT, for insights into US monetary policy. Fed Chair Kevin Warsh stated that forward-looking remarks are not well-suited in the current policy juncture [3]. Meanwhile, European Central Bank (ECB) rate hike bets increased after board member Isabel Schnabel warned that the Iran conflict keeps core inflation elevated, and Governor of the Bank of Italy Fabio Panetta flagged persistent inflation risks due to energy supply uncertainties in the Strait of Hormuz [2]. Panetta’s speech scored 6.2/10 on FXS Speechtracker, above the historic baseline, signaling a more impactful intervention and a modestly hawkish tone despite concerns about downside growth [2].
Foreign Institutional Investors (FIIs) have remained net buyers in the Indian stock market for three consecutive trading days, investing Rs. 1,991.55 crore, reflecting optimism ahead of the Q1FY27 earnings season [3]. Technical analysis shows USD/INR trading lower at around 95.00, with the Relative Strength Index (14) at 51, indicating neutral momentum [3]. For the Euro, the mix of inflation vigilance and growth anxiety suggests limited support, with markets likely to price in lingering risk premia rather than a confident policy tightening path [2].
CONCLUSION
US airstrikes on Iran have triggered volatility in currency markets, with the Euro and Indian Rupee both edging up against the US Dollar amid elevated oil prices and geopolitical tensions. Market participants are awaiting the FOMC minutes for further direction, while ECB policymakers highlight persistent inflation risks. The overall sentiment remains cautious, with limited upside for the Euro and neutral momentum for the Indian Rupee.