EUR/USD rose for a seventh session as the US dollar fell to a six-week low. The pair traded near 1.1790, up 0.30%, helped by expectations of possible US–Iran talks in the week ahead.
Reports said Donald Trump indicated talks could resume this week and said he opposed a 20-year suspension of Iran’s uranium enrichment. Energy prices kept falling, which can reduce cost pressure for the Eurozone, a net importer of crude and natural gas.
US producer inflation rose to 4% year on year in March, below the 4.6% forecast and up from 3.4% in February, according to the BLS. Core PPI was 3.8% year on year, unchanged, while the ADP Employment Change 4-week average rose to 39,250 from 26,000.
Market pricing shifted towards the Fed keeping rates unchanged this year, according to PMT. Chicago Fed President Austan Goolsbee said rate cuts could be delayed until 2027 if oil prices slow progress towards the 2% inflation goal.
ECB President Christine Lagarde said the ECB is well placed to handle Iran-related developments and warned against dismissing the shock too early. Upcoming releases include the Fed’s Beige Book, US policymaker speeches, Eurozone February industrial production, and comments from ECB members.
EUR/USD traded near 1.1793, above clustered 50-, 100- and 200-day SMAs around 1.1673 and supported by a rising trend line from 1.1411. RSI (14) was 64.8, with resistance linked to the 1.1929 area.
We recall the optimism in 2025 when EUR/USD pushed toward 1.1800, driven by hopes of US-Iran de-escalation. That sentiment has since been replaced by a focus on central bank policy divergence, which now dictates the market. The pair currently trades much lower, around 1.1250, reflecting this new reality.
The Federal Reserve’s hawkish stance, which was taking shape last year, remains the dominant force. The latest US Consumer Price Index reading for March 2026 came in at a persistent 3.1%, keeping it well above the Fed’s 2% target. This stubborn inflation, combined with a still-resilient labor market, has pushed expectations for a first rate cut deep into the third quarter of 2026.
Conversely, the European Central Bank has already begun its easing cycle, cutting its main deposit rate by 25 basis points in March 2026. Eurozone HICP inflation fell to 2.4% last month, moving much closer to its target and giving the ECB cover to act. This confirms the policy split that we see widening between the two central banks.
For derivative traders, this clear policy path suggests selling out-of-the-money EUR/USD call options or establishing bear call spreads. This strategy profits from the expected continued weakness or sideways movement in the pair, with defined risk. Implied volatility has decreased from the peaks seen during the 2025 Iran conflict, making option premiums for bearish positions more reasonably priced.
Looking ahead, we must closely monitor upcoming US core PCE data, as this is the Fed’s preferred inflation gauge. The CME FedWatch Tool currently shows markets are pricing in only a 20% chance of a rate cut before September 2026. Any data that shifts these probabilities will be the next major catalyst for the currency pair.
