The EUR/USD currency pair maintained a positive bias for the second consecutive day, trading around the 1.1420 level during the Asian session on Thursday, though gains remained modest at less than 0.10% for the day and the pair stayed within the previous day's range [1]. The movement in EUR/USD was largely influenced by US Dollar (USD) dynamics, with the USD Index (DXY) staying below its weekly top due to reduced expectations for Federal Reserve (Fed) rate hikes following last week's soft US Nonfarm Payrolls (NFP) report and the June 16-17 FOMC meeting minutes, which highlighted high uncertainty regarding the interest rate outlook [1]. Despite this uncertainty, Fed officials indicated that some policy firming would likely be necessary to bring inflation back to the 2% target, and the CME Group's FedWatch Tool showed traders pricing in a roughly 70% chance of a rate hike in September [1].
Geopolitical developments also played a significant role, as the US military launched new strikes against Iran in response to Tehran's attacks on commercial ships in the Strait of Hormuz, prompting Iran to retaliate by targeting approximately 85 US military installations and assets in Bahrain and Kuwait [1]. US President Donald Trump announced that the memorandum of understanding with Iran, which aimed to end the Middle East conflict, is now over [1]. These escalations supported the USD as a safe-haven asset, thereby capping further upside for the EUR/USD pair [1].
On the European side, recent Eurozone inflation data came in lower than expected, reducing market bets on further European Central Bank (ECB) rate hikes and limiting bullish momentum for the Euro [1]. As a result, traders remained cautious about taking aggressive positions in the shared currency [1]. Market participants are now awaiting the release of the ECB Monetary Policy Meeting Accounts and the US Weekly Initial Jobless Claims for additional direction [1].
Overall, the EUR/USD pair's movement reflects a balance between geopolitical risks, central bank policy uncertainty, and recent economic data surprises, with neither side gaining strong directional conviction in the near term [1].
CONCLUSION
The EUR/USD pair remains range-bound above 1.1400, with gains capped by escalating US-Iran tensions and uncertainty over central bank policy paths. Market participants are closely watching upcoming ECB and US economic releases for further guidance. The overall sentiment is cautious, with limited conviction for a strong move in either direction.