The Euro rose nearly 0.8% against the US Dollar on Wednesday, trading just below 1.1800. The move followed reports of progress towards a US-Iran memorandum to end the conflict and set a framework for later nuclear talks, alongside a pause in vessel escort operations in the Strait of Hormuz and an announcement that the offensive stage had ended.
Eurostat data showed Eurozone producer prices rose 2.1% year-on-year in March, up from -3% in February and above the 1.8% forecast. Month-on-month, producer prices increased 3.4%, up from -0.6% and above the 3.3% expectation.
Eurozone Activity And Price Signals
Final HCOB Services PMI figures showed Eurozone services activity remained in contraction at 47.6, compared with a 47.4 preliminary reading. Germany was unchanged at 46.9, while France and Italy also stayed in contraction.
Attention then turned to the US ADP Employment Change report, expected at 99K for April versus 62K in March. In EUR/USD levels, resistance sits near 1.1790, with potential rises towards 1.1850 and 1.1930, while support is seen at 1.1690 and 1.1645–1.1675.
We recall how hopes for a US-Iran peace deal in May of 2025 briefly boosted risk appetite, sending the EUR/USD pair to test the 1.1800 resistance level. That rally was also fueled by hot producer price data, which at the time suggested an imminent rate hike from the European Central Bank. The market sentiment then was quite different from the cautious tone we see today.
The situation has changed significantly since last year, as the focus is no longer on rate hikes but on potential cuts. Eurozone inflation has cooled, with the latest Harmonised Index of Consumer Prices (HICP) for April 2026 coming in at 2.4%, a stark contrast to the inflationary pressures we worried about in 2025. This moderation in price growth has led the ECB to signal its first potential rate cut for this summer.
This creates a new dynamic for the Euro, which is now trading near 1.0850, far below the highs of 2025. With markets now pricing in roughly 75 basis points of ECB rate cuts by the end of 2026, the path of least resistance for the Euro appears to be downwards against the dollar. The US Federal Reserve has been more hesitant to commit to cuts, providing a fundamental strength to the dollar that was absent during the brief peace-driven rally last year.
Strategy And Risk Considerations
The geopolitical landscape also offers a lesson, as the optimism of last year’s potential peace deal was short-lived. Ongoing disruptions to shipping and persistent tensions in the Middle East have reminded us that the US dollar’s safe-haven appeal can return swiftly. This contrasts sharply with the risk-on mood that punished the dollar in the spring of 2025.
Given this environment, traders should consider using options to define risk, as the clear bullish trend of last year is gone. Buying puts on EUR/USD could be a straightforward way to hedge or speculate on further downside driven by central bank policy divergence. Alternatively, strategies that benefit from volatility, such as straddles around upcoming ECB and Fed meetings, could be effective in this more uncertain market.
