Dollar Strength Keeps Pressure on EUR/USD as Rates and Tensions Rise

The EUR/USD pair continues to face downward pressure for the fourth consecutive session, trading below the mid-1.1500s and hovering just above a one-month low.

The U.S. Dollar remains strong ahead of the FOMC policy meeting, which begins on Wednesday, as several supportive factors combine to lift the currency and weigh on EUR/USD.

Persistent expectations for additional rate hikes by the Federal Reserve, along with inflation risks linked to higher energy costs, have kept U.S. bond yields close to multi-year highs.

U.S. Treasury yields have been edging toward the key 5% mark, with ING's Padhraic Garvey noting that the Fed will be closely watching stress along the yield curve and that the 10-year U.S. Treasury yield is 'looking for an excuse to mark at 5%.'

The geopolitical backdrop in the Middle East has further supported the Dollar, with ongoing clashes in the Strait of Hormuz underpinning crude oil prices and reinforcing support for the Greenback.