EUR/USD Stuck Near August Peak Amid Ongoing Tensions
The EUR/USD pair has been range-bound in recent days, unable to make a clear move. Despite some fluctuations, it remains near its August peak of 1.1581. The US dollar's demand remains subdued due to poor employment figures and steady inflation.
The ongoing stalemate between the US and Iran, along with tensions in the Middle East, has contributed to the lack of directional strength in the market. The Strait of Hormuz remains closed, disrupting traffic and pushing up oil prices. This has led to fears that higher energy costs will soon spill over into inflation.
US Treasury Secretary Scott Bessent has threatened Iran with economic isolation 'like the world has never seen before.' However, Tehran claims it will not end its fight in the Middle East until President Donald Trump is out of office in 2029. The Memorandum of Understanding (MoU) signed in June is set to expire on Sunday.
The recent US data, including the July Consumer Price Index (CPI), has kept Fed hike odds subdued. Annual inflation declined to 3.4% in July from 3.5% in June, in line with market expectations. This supports the case for an on-hold Federal Reserve in September, limiting USD demand.