Ceasefire Signals And Market Reaction
Tehran also said it will not reopen the Strait of Hormuz in exchange for a temporary ceasefire. The strait is a route for 20% of global oil supply. Markets are waiting for the US ISM Services PMI for March at 14:00 GMT. It is forecast at 55.0, down from 56.1. Later this week, the FOMC minutes from the March meeting are due on Wednesday and US CPI for March is due on Friday. EUR/USD is trading just under the 20-day EMA near 1.1570. Chart levels cited include resistance at 1.1570, 1.1600 and 1.1660, and support near 1.1500, 1.1450 and 1.1411, with a reference low at 1.1408. The RSI is described as moving into the 40.00–60.00 range from below 40.00.Dollar Dominance And Fed Framework
The US Dollar is the most traded currency, making up over 88% of global FX turnover, or about $6.6 trillion per day in 2022. It became the main reserve currency after the Second World War, and left the gold standard after the Bretton Woods Agreement in 1971. The Federal Reserve guides policy with mandates for price stability and full employment, using interest rates and tools such as QE and QT. The Fed targets 2% inflation. We recall how this time in 2025, hopes of a US-Iran ceasefire briefly improved market mood, pushing EUR/USD towards 1.1560. The improved risk appetite caused the Dollar Index to dip below 100 as traders bet on a less volatile global outlook. This period was heavily influenced by geopolitical headlines rather than pure economic fundamentals. Today, the landscape is starkly different as the focus has shifted from geopolitical optimism to stubborn economic data. We see the EUR/USD trading much lower, currently around 1.0855, with the Dollar Index firm above 104.50. The market’s primary driver is no longer Middle East diplomacy but core inflation figures. We have just seen the March 2026 Consumer Price Index (CPI) report come in at a stubborn 3.4%, well above the Federal Reserve’s 2% goal. Combined with another strong jobs report showing 285,000 new payrolls, the data supports a “higher for longer” interest rate stance from the Fed. This fundamental picture provides a strong tailwind for the US Dollar. That symmetrical triangle reversal we watched for in 2025 clearly failed to materialize as fundamental pressures took over. With the Fed likely on hold, implied volatility on EUR/USD options has compressed, with the VIX index hovering near a two-year low of 13.5. Traders should consider strategies that benefit from this environment, such as selling out-of-the-money puts on the dollar or setting up bearish call spreads on the EUR/USD to capitalize on range-bound action. Looking ahead, the minutes from the March 2026 FOMC meeting will be critical for gauging the committee’s patience with inflation. Any hawkish surprises could easily push the Dollar Index toward the 105.50 resistance level last seen in late 2025. Therefore, positioning for continued dollar strength against the euro seems prudent until we see a definitive shift in the inflation data. Create your live VT Markets account and start trading now.
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