EUR/USD traded around 1.1790 during Asian hours on Wednesday, remaining flat after seven consecutive days of gains. The currency pair's stability is attributed to a weakened US Dollar, driven by rising optimism that the United States and Iran could soon resume negotiations, potentially leading to a deal to end the conflict and reopen the Strait of Hormuz. US President Donald Trump indicated that talks could restart this week, while Vice President JD Vance noted 'a lot of progress' in the initial round of negotiations in Pakistan, with follow-up discussions possibly occurring within days [1].
Market sentiment was further influenced by softer-than-expected US Producer Price Index (PPI) data. The US PPI rose 0.5% month-over-month, significantly below the 1.2% consensus, while core PPI increased just 0.1% MoM versus expectations of 0.6%. On an annual basis, US PPI increased 4% in March, missing the 4.6% forecast and rising from February’s 3.4%, while Core PPI held steady at 3.8% year-over-year, unchanged from the prior month [1]. These figures reinforced the view of easing inflation pressures, particularly as the services component—closely watched by the Federal Reserve—remained subdued.
The Euro found additional support as easing energy prices provided relief to the Eurozone, which is a net importer of crude oil and natural gas. Markets are currently pricing in modest tightening by the European Central Bank (ECB) at its April 30 meeting, along with two additional rate hikes this year. ECB President Christine Lagarde stated that the central bank is well-positioned to manage developments related to Iran but cautioned that it is too early to dismiss the impact of the shock [1].
CONCLUSION
EUR/USD's stability near 1.1800 reflects a combination of optimism over US-Iran negotiations and softer US inflation data, which have weakened the US Dollar. The Euro is further supported by easing energy prices and expectations of ECB tightening, though policymakers remain cautious about geopolitical risks. Market participants are closely watching upcoming negotiations and central bank decisions for further direction.