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Euro holds modest gains as Oil prices tumble on US-Iran diplomacy

Euro holds modest gains as Oil prices tumble on US-Iran diplomacy
  • EUR/USD holds modest gains as the US Dollar recovers from earlier lows.
  • Positive US-Iran diplomatic headlines push Oil prices sharply lower.
  • ECB policymaker Peter Kažimír signals that further interest rate hikes may be needed.

EUR/USD trades with a bullish bias on Monday but lacks upside momentum as the US Dollar (USD) trims part of its earlier decline, while traders assess fresh Middle East headlines that sent Oil prices tumbling. At the time of writing, the pair trades around 1.1200, up 0.37% on the day, after reaching a one-week high of 1.1237.

Iranian President Masoud Pezeshkian said the Supreme Leader had granted the government certain powers regarding negotiations, according to ISNA. On the US side, Axios reported that President Donald Trump favours giving diplomacy with Iran more time. West Texas Intermediate (WTI) trades near $96 a barrel, down more than 5% on the day.

The drop in Oil prices offers some relief from inflation concerns and keeps US Treasury yields on the back foot, which should limit the US Dollar’s upside. Markets also remain cautious before Tuesday’s US midterm elections. The US Dollar Index (DXY), which tracks the US currency against a basket of six major peers, trades around 101.70, off an intraday low of 101.44 but still down 0.25% on the day.

On the data front, the US ISM Manufacturing PMI rose to 55.5 in October from 54.5, beating expectations of 54.6. Meanwhile, the Prices Paid Index eased to 75.2 from 77.9, below the forecast of 77.0.

Focus also turns to Friday’s Nonfarm Payrolls (NFP) report, which could shape expectations for a December Fed rate hike, currently priced at a 74% probability, according to the CME FedWatch Tool. Policymakers remain open to further tightening to bring inflation back to the central bank’s 2% target, although a softer jobs report could temper those expectations.

Euro appeal muted even as ECB guidance and France rating offer support

Analysts at DBS Group Research caution that the Dollar’s recent loss of momentum “does not automatically create a compelling case for the EUR.” They argue that “Europe’s fiscal and political uncertainties, particularly in France, and its vulnerability to elevated energy prices complicate the search for viable alternatives” to the USD.

Nonetheless, DBS notes that the Euro “did find support from the European Central Bank providing clearer guidance than the Fed on the prospects of a December hike and Moody’s affirmation of France’s Aa3 sovereign debt rating,” tempering some of the region-specific concerns.

In the Eurozone, the final HCOB Manufacturing PMI came in at 52.7 in October, above the preliminary reading and expectations of 52.4. Meanwhile, ECB policymaker Peter Kažimír said on Monday, “The question is increasingly not if further ECB action is needed but how much.” He added, “Markets may still underestimate what path is required.” Reuters reported that traders anticipate two to three ECB rate hikes over the next year.

US Dollar Price Today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.

USD EUR GBP JPY CAD AUD NZD CHF
USD -0.35% -0.17% 0.19% 0.00% 0.21% 0.04% -0.73%
EUR 0.35% 0.19% 0.55% 0.36% 0.57% 0.39% -0.35%
GBP 0.17% -0.19% 0.38% 0.21% 0.38% 0.20% -0.53%
JPY -0.19% -0.55% -0.38% -0.16% 0.03% -0.14% -0.90%
CAD -0.01% -0.36% -0.21% 0.16% 0.21% 0.02% -0.70%
AUD -0.21% -0.57% -0.38% -0.03% -0.21% -0.17% -0.91%
NZD -0.04% -0.39% -0.20% 0.14% -0.02% 0.17% -0.73%
CHF 0.73% 0.35% 0.53% 0.90% 0.70% 0.91% 0.73%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).