The EUR/USD currency pair rebounded on Thursday after earlier trading under pressure, as the US Dollar (USD) lost momentum. This allowed the Euro (EUR) to recover from intraday lows, despite the release of strong US Purchasing Managers Index (PMI) data and ongoing cautious market sentiment due to US-Iran tensions in the Strait of Hormuz [1]. At the time of reporting, EUR/USD was trading around 1.1714, having bounced from an intraday low of 1.1679. The US Dollar Index (DXY) was at 98.57 after reaching an intraday high of 98.80 [1].
Key economic data included the preliminary S&P Global Manufacturing PMI, which rose to 54 in April, surpassing expectations and up from 52.3 in March, marking a 47-month high. The S&P Global Services PMI also improved to 51.3, above forecasts of 50 and up from 49.8, reaching a two-month high. Both PMI readings came in above expectations. However, US Initial Jobless Claims increased to 214,000 for the week ending April 18, exceeding the 212,000 forecast and up from 208,000 previously [1].
Despite the strong PMI data, the US Dollar failed to sustain its gains, with the pullback described as likely technical in nature. Downside for the USD is expected to be limited due to ongoing US-Iran tensions. US President Donald Trump stated on Truth Social that the US has 'total control over the Strait of Hormuz' and has ordered the Navy to 'shoot any boat putting mines in Hormuz,' declaring the route 'sealed up tight' until Iran makes a deal. Iranian officials, including Mohammad Bagher Ghalibaf, the speaker of the Iranian parliament and lead negotiator, insisted that the US must remove the naval blockade, which Tehran views as a violation of the ceasefire and a key obstacle to resuming negotiations [1].
The dual blockade of the Strait of Hormuz is causing ongoing supply disruptions, keeping oil prices elevated and inflation risks in focus. This situation is adding pressure on central banks to maintain a tighter monetary policy stance. Markets are increasingly pricing in potential rate hikes from the European Central Bank (ECB), while expecting the Federal Reserve (Fed) to keep interest rates on hold, a shift from earlier expectations of rate cuts. Market sentiment is expected to remain sensitive to further developments in the US–Iran conflict, with EUR/USD largely influenced by US Dollar dynamics [1].
CONCLUSION
The EUR/USD rebounded as the US Dollar eased despite strong US PMI data, with geopolitical tensions in the Strait of Hormuz and inflation risks keeping markets cautious. Elevated oil prices and persistent supply disruptions are prompting expectations of tighter monetary policy from the ECB and a pause from the Fed. Market sentiment remains highly sensitive to further developments in the US-Iran conflict.