The European Central Bank is raising interest rates by a quarter point for the first time since 2023, responding to elevated inflation caused by the Iran war and prolonged oil price increases, though economic weakness poses a balancing challenge.
EUR/USD trades flat below 1.1700 ahead of central banks' policy announcements.
Germany slashed its 2026 GDP forecast to 0.5% from 1.0% amid stagflation risks, while elevated inflation and geopolitical tensions weaken the euro against a resilient dollar, limiting its safe-haven appeal compared to US Treasuries.
Euro declines as traders adopt caution due to Middle East tensions and US Dollar safe-haven demand.
The dollar recovered to a one-week high as US-Iran tensions over the Strait of Hormuz boosted safe-haven demand, while the euro weakened on Eurozone consumer confidence declining to a 3.25-year low and Germany cutting its 2026 GDP forecast.
EUR/USD forecast is undermined by crude oil prices nearing $100 amid Iran tensions.
Euro stalls as Oil shock keeps the US Dollar in play
EUR/USD forecast is undermined by crude oil prices nearing $100 amid Iran tensions.