EUR/USD Surges as Trump Delays Action on Iran, Waller Boosts Rate Cut Expectations

• EUR/USD Rises by 0.36%, Poised to Close the Week Unchanged Following Trump’s Delay on Iran Military Strike
• Contrasting Views in Fed: Waller Advocates for July Rate Cut, Diverging from Fed Report and Barkin’s Cautious Outlook
• EU-US Trade Agreement Uncertain as July 9 Deadline Approaches, Limiting EUR/USD Gains

The Euro has regained strength against the US Dollar on Friday, with prospects to end the week largely stable as risk appetite wanes. This market sentiment shift occurs despite President Donald Trump postponing military action in the Israel-Iran tension. Currently, the EUR/USD is trading at 1.1534, marking a 0.36% increase.

Market sentiment has been negatively impacted by US trade policies that limit chipmakers with operations in China, with a significant US official’s proposal to cancel waivers causing major US stock indices to drop. Meanwhile, Trump’s preference for diplomacy over combat, delaying potential military action by two weeks, has supported the Euro. However, Iran has declared it will not engage in negotiations while Israel continues its aggressive actions.

The Euro also received a boost from Federal Reserve Governor Christopher Waller’s endorsement of a rate cut in July. In contrast, the Fed’s monetary policy report indicates that the current policy is suitable given the uncertainty of external shocks, while Richmond Fed President Thomas Barkin has advocated for more patience before cutting rates.

Nonetheless, the EUR/USD might face downward pressure due to difficulties in finalizing a trade deal between the European Union (EU) and the United States. The likelihood of reaching an agreement is fading as the July 9 deadline approaches.

In economic news, the EU’s Consumer Confidence index fell short of expectations, yet traders overlooked the disappointing data, pushing the EUR/USD higher.

Market Movers Daily Digest: EUR/USD Overcomes Fed’s Hawkish Stance and Rallies

• Geopolitical developments continue to influence market dynamics, which so far have favored further US Dollar gains. Thus, a risk-off environment is likely to depress EUR/USD, although the “Sell America” trade persists.
• Recent US data indicates a cooling economy, with the Philadelphia Fed Manufacturing Index remaining at -4 in June, unchanged from May and below expectations for a slight improvement to -1.
• Fed Chair Jerome Powell maintains a wait-and-see approach, stating that policy is moderately restrictive. He emphasized that as long as the labor market remains robust and inflation cools, maintaining current rates is the “right thing to do.”
• This week, the Fed maintained interest rates at 4.25%-4.50%. Fed officials also revised their economic projections, lowering the 2025 GDP growth forecast to 1.4% from 1.7% in March. The Unemployment Rate estimate was increased to 4.5% from 4.4%, while the core PCE inflation estimate was raised to 3.1% from 2.8%.
• EU Consumer Confidence in June dropped to -15.3, worse than the expected -14.5 improvement.
• Market participants do not anticipate the ECB to decrease its Deposit Facility Rate by 25 basis points at the upcoming July monetary policy meeting.

Euro Technical Analysis: EUR/USD Surpasses 1.1500, Bulls Eye 1.1550

From a technical perspective, the EUR/USD uptrend is resuming. The chart’s “morning star” three-candle pattern suggests that buyers are accumulating, aiming to push the exchange rate higher. Additional confirmation comes from the Relative Strength Index (RSI), which is trending upwards after a brief pause.

The immediate resistance for EUR/USD is at 1.1550. Breaking this level could open the path to 1.1600, followed by the year-to-date high of 1.1631. On the downside, a daily close below 1.1500 could lead to a test of 1.1450. Subsequent key support is found at the 20-day Simple Moving Average (SMA) at 1.1438, then 1.1400.