Euro's Gains Reversal Fuels USD Strength Amid Ongoing Geopolitical Tensions

The Euro's gains against the US Dollar were short-lived as geopolitical tensions resurfaced. The initial optimism following a pause in attacks between the United States and Iran sent Oil prices sharply lower, weighing on the USD. However, US officials later stressed that military action against Iran had not been ruled out.

This lack of concrete negotiations kept geopolitical risks alive, limiting the downside in both the USD and Oil prices. The US Dollar Index (DXY) recovered from an intraday low of 101.12 to trade near 101.46.

The Fed's interest-rate decision on Wednesday remains a key focus for traders, with expectations centered around leaving rates unchanged. However, there is still a 33% chance of a hike, according to the CME FedWatch Tool, and a 79% probability of an increase in September.