The euro gained ground against the U.S. dollar on Tuesday, with the EUR/USD pair touching a fresh weekly high near 1.1610 during late Asian trading. The rally was driven by a sharp decline in the U.S. dollar, following the announcement of a ceasefire between Israel and Iran.
Investor appetite for risk improved after U.S. President Donald Trump confirmed the truce, reducing demand for traditional safe-haven assets like the dollar. As a result, the U.S. Dollar Index (DXY), which measures the greenback against six major currencies, fell to around 98.10, down from Monday’s two-week high of 99.42.
Adding to the dollar’s weakness were dovish signals from the Federal Reserve. On Monday, Fed Governor Michelle Bowman indicated support for a possible rate cut as early as July, citing concerns about the labor market. “It is time to consider adjusting the policy rate, and we should put more weight on downside risks to the job market going forward,” Bowman said.
Her comments have increased market expectations for a rate cut next month. According to the CME FedWatch tool, the probability of a July rate reduction rose to 22.7%, up from 14.5% last Friday.
Meanwhile, in the Eurozone, officials at the European Central Bank (ECB) expressed growing concerns about economic growth, partly due to trade tensions stemming from U.S. tariffs. ECB President Christine Lagarde, speaking to the European Parliament’s economic committee on Monday, warned of softening economic indicators.
“Survey data point to some weaker prospects for economic activity in the near term,” Lagarde said. “Risks to the growth outlook remain tilted to the downside,” she added, while also raising doubts about maintaining inflation near the ECB’s 2% target.
