- EUR/USD edges higher on Wednesday as easing US-Iran tensions improve risk appetite.
- The US Dollar Index retreats after hitting ten-month highs earlier in the week.
- Stronger US data, including ISM PMI, ADP jobs, and Retail Sales, fails to lift the Greenback.
EUR/USD extends its advance for a second consecutive day on Wednesday, climbing to one-week highs as improving optimism around the US-Iran war lifts risk sentiment, pushing the Euro (EUR) higher and weighing on the US Dollar (USD).
At the time of writing, the pair is trading around 1.1611, up about 0.50% on the day after touching a high of 1.1623. Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is hovering near 99.45 after touching ten-month highs of 100.64 earlier this week.
The move comes as markets react to growing expectations that the conflict in the Middle East could wind down following recent comments from both US and Iranian leaders.
US President Donald Trump, speaking from the Oval Office, told reporters that the United States “will be leaving Iran very soon,” adding that military action could end within “two or three weeks.” His remarks came after Iranian President Masoud Pezeshkian said on Tuesday that Iran has the “necessary will” to end the conflict, but is seeking guarantees to ensure it does not happen again.
However, uncertainty remains elevated. Trump also said in a post on Truth Social that Iran’s leadership had requested a ceasefire, adding that Washington would consider it only if the Strait of Hormuz is “open, free and clear.” He warned that until then, the US would continue military operations.
On the data front, traders showed a muted reaction to the latest US economic releases. The ISM Manufacturing PMI rose to 52.7 in March, beating expectations of 52.5 and improving slightly from the previous 52.4.
The ADP Employment Change rose by 62K in March, beating expectations of 40K but easing from the previous reading of 66K (revised from 63K). Meanwhile, Retail Sales increased by 0.6% in February, surpassing forecasts of 0.5% and rebounding from a revised -0.1% decline in January (previously -0.2%).
Traders also digested fresh remarks from Federal Reserve (Fed) and European Central Bank (ECB) officials. St. Louis Federal Reserve (Fed) President Alberto Musalem said US monetary policy is “currently at the low end of the neutral range” and is “well positioned,” adding that it should likely be held in place “for some time.” He noted that war-related shocks have “increased risks to the economy and inflation” and said he can see scenarios to both “raise and cut interest rates.”
ECB policymaker Gabriel Makhlouf said the central bank is “ready to act when data clarifies the effects of the war,” warning that a prolonged conflict “would bring the ECB’s adverse scenario closer.” He added that policymakers are “not ruling anything in or out.”
