EUR/USD rose to about 1.1670 in early Asian trading on Wednesday, moving above 1.1650. The Euro strengthened against the US Dollar after US President Donald Trump agreed to a two-week ceasefire with Iran.
A White House official said Trump agreed to the two-week ceasefire on Tuesday, on the condition that Iran reopen the Strait of Hormuz. CNN reported that Israel also agreed to the ceasefire.
Ceasefire Developments And Market Focus
The announcement followed a proposal from Pakistan’s Prime Minister Shehbaz Sharif for a ceasefire to allow diplomatic talks between the US and Iran. Markets are watching developments around the ceasefire and wider Middle East tensions.
Later on Wednesday, attention turns to the minutes of the Federal Open Market Committee meeting. The minutes may provide detail on how officials assess the recent energy shock linked to Middle East conflicts.
Looking back at the events of 2025, we saw the EUR/USD spike above 1.1650 on the temporary US-Iran ceasefire news. That rally was a classic risk-on reaction, driven by the immediate relief of tensions in the Strait of Hormuz. The effect was short-lived, as the underlying disagreements were never resolved.
As of today in April 2026, the market has completely priced out that optimism, with EUR/USD having fallen back to a range around 1.0900. We’ve seen Brent crude prices creep back up, averaging over $92 per barrel in the first quarter of 2026, reflecting the renewed geopolitical risk premium. This sustained pressure on energy contrasts sharply with the brief dip we saw following the 2025 ceasefire announcement.
Positioning And Volatility Implications
The lesson from last year is that any diplomatic progress can cause sharp, but temporary, drops in volatility. We are seeing one-month implied volatility for EUR/USD options trading near 8.2%, up significantly from the lows of around 5.5% seen during that brief de-escalation period. Traders should consider buying options, such as straddles or strangles, to position for sharp moves in either direction as headlines continue to create uncertainty.
Last year, we noted the Federal Reserve was monitoring the energy shock, but their focus has since returned to domestic inflation and labor data. Recent inflation figures in the US for February 2026 came in at 2.8%, still stubbornly above the Fed’s target, limiting their ability to ease policy. In contrast, the European Central Bank remains more exposed to energy price volatility, creating a policy divergence that weighs on the euro.
Given this context, selling rallies in EUR/USD on any new, temporary peace headlines appears to be the prudent strategy. We can use last year’s spike to 1.1670 as a historical reference point for an extreme risk-on reaction. Using call credit spreads on the euro could be an effective way to collect premium while defining risk against another short-lived relief rally.
