The Euro (EUR) has softened against the US Dollar (USD) following an almost 3% rally from late July, with price action turning defensive as the pair enters Monday’s North American session with a fractional 0.1% decline versus the USD [1]. EUR/USD is trading around 1.1670, near levels last seen in mid-May, as the US Dollar steadies after last week’s volatility triggered by the US Treasury’s surprise buyback announcement [2]. The US Dollar Index (DXY) is attempting to reclaim 99.00, trading around 98.95 [2].
Market participants are adopting a cautious stance ahead of the US Treasury’s expected announcement of expanded sanctions on Iran, with Treasury Secretary Scott Bessent scheduled to provide details at a press conference on Monday at 17:00 GMT [2][3]. The new sanctions aim to broaden the scope of secondary measures against entities and countries maintaining business ties with Iran, with the US administration seeking to limit Tehran’s economic connections and influence in the region [3]. Iranian officials have responded by stating they will use all bilateral capabilities to confront US economic sanctions [2].
On the Euro side, the economic calendar is relatively quiet in the first half of the week, with the German IFO business sentiment figures scheduled for Tuesday being a key focus [1][2]. Political risks are rising in the Eurozone, highlighted by the widening Bund–BTP spread and upcoming French budget negotiations, as well as polls showing strong potential results for far-right candidate Marine Le Pen [1]. Technically, EUR/USD remains bullish, with resistance above 1.1700 and support around 1.1580/1.1600, and the RSI hovering near the overbought threshold at 70 [1].
Looking ahead, markets are watching for the US Personal Consumption Expenditures (PCE) Price Index on Wednesday, with another soft inflation reading potentially strengthening expectations that the Federal Reserve will leave interest rates unchanged in September and putting fresh pressure on the US Dollar [2]. Fed Chair Kevin Warsh’s remarks at the Jackson Hole Symposium on Friday are also anticipated [2]. On the Eurozone front, strategists at BNY Mellon note that inflation remains the core issue, with French and Spanish flash CPI data on Friday and German unemployment data providing further context for the European Central Bank’s (ECB) next steps [2]. Markets widely expect the ECB to raise interest rates in September [2].
According to the latest currency heat map, the US Dollar was the strongest against the Canadian Dollar, while the EUR/USD pair showed a 0.08% change in favor of the USD [3].
CONCLUSION
The Euro’s recent rally has stalled as the US Dollar steadies ahead of significant geopolitical and economic events, including expanded US sanctions on Iran and key inflation data. Market sentiment is cautious, with technical and political risks in focus for the Eurozone and the US Dollar’s direction hinging on upcoming data releases and policy signals.