The Euro (EUR) traded flat against the US Dollar (USD) at around 1.1445 during the European trading session on Friday, as markets remained cautious amid ongoing military tensions between the United States and Iran [1]. The US Dollar Index (DXY), which measures the Greenback against six major currencies, also traded flat around 101.70, reflecting subdued momentum in the currency markets [1]. Meanwhile, the Euro trimmed losses against the British Pound (GBP), rebounding to levels near 0.8500 from 13-month lows of 0.8455, supported by speculation that the European Central Bank (ECB) will hike rates in the coming months [2]. Despite this recovery, EUR/GBP is on track for its fourth consecutive weekly decline, having depreciated about 2.20% since mid-June [2].
Geopolitical developments have heightened concerns about energy-driven inflation. Iran threatened to close the Red Sea oil route if the US strikes Iranian power infrastructure, responding to US President Donald Trump's remarks about potential military action against Iranian bridges and power plants [1]. Such disruptions could further squeeze global oil supply and accelerate inflation fears [1]. These concerns have revived expectations for at least one US Federal Reserve rate hike in 2026, helping limit losses for the US Dollar [4].
On the monetary policy front, ECB Governing Council Member Joachim Nagel emphasized the central bank's vigilance regarding Middle East developments and warned that policymakers will act decisively if necessary [1]. Nagel's tone was moderately hawkish but less forceful than usual, as reflected in a lower FXS Speechtracker score of 6.4/10 compared to the historic 7.2/10 baseline [1]. A Reuters poll showed that 70% of respondents expect a quarter-point ECB rate hike in September, following a pause at July's meeting [2]. Most ECB policymakers have expressed concern about high inflation and readiness to hike rates if necessary [2]. June’s final Eurozone Harmonized Index of Consumer Prices (HICP) is expected to confirm that price pressures eased to 2.8% from 3.2% in the previous month, though these figures pre-date recent geopolitical events and crude price increases [2].
From a technical perspective, United Overseas Bank (UOB) strategists noted that EUR/USD has eased after Wednesday’s surge, with current price action seen as consolidation between 1.1420 and 1.1465 [3]. The Euro retains an upside bias over a 1–3 week view, but momentum toward the 1.1520 resistance remains uncertain, and a break below 1.1405 would signal a return to broader range trading [3]. The DXY showed resilience below the 200-period Simple Moving Average near 100.55, with technical indicators suggesting fragile momentum and tentative stabilization after recent losses [4].
The US Dollar was the strongest against the Australian Dollar, while the Euro gained 0.06% against the USD and 0.12% against the GBP on the day [4].
CONCLUSION
The Euro remains steady against the US Dollar and trims losses against the Pound, supported by ECB rate hike speculation and cautious market sentiment amid geopolitical tensions. While inflation concerns and central bank policy expectations are driving currency movements, technical indicators suggest consolidation and limited upside for the Euro in the near term. Market participants are closely watching upcoming inflation data and geopolitical developments for further direction.