EUR/USD remains rangebound amid the prolonged US-Iran stalemate and widely expected hikes
At a Glance
The desk maintains a cautious outlook on EUR/USD, anticipating continued rangebound trading amid geopolitical tensions and central bank policy uncertainty. Per the full note source, the US dollar has found some support as US-Iran negotiations stall, while the Fed's shift away from an easing bias is underscored by resilient economic data. With the market pricing in an 84% chance of a June rate hike from the ECB, the euro faces headwinds despite the potential for inflationary pressures to influence Fed policy. Upcoming US CPI data could serve as a catalyst for volatility in the pair.
Key Takeaways
- 01EUR/USD remains rangebound amid geopolitical tensions and central bank policy uncertainty.
- 02The market is pricing in an 84% chance of a June rate hike from the ECB, which may limit euro upside.
- 03Upcoming US CPI data could serve as a catalyst for volatility in the pair.
- 04The Fed's shift away from an easing bias is supported by resilient economic data and elevated energy prices.
Full Analysis
What the desk is arguing
The desk frames this as a period of consolidation for EUR/USD, with geopolitical developments and central bank signals keeping the pair in a tight range. The recent rejection of war-ending proposals by both the US and Iran has left traders in a wait-and-see mode, as they look for clearer direction from upcoming economic data.
The Fed's gradual pivot away from an easing stance is evident, with elevated energy prices and strong US data suggesting that inflation could remain above the 2% target for longer. This backdrop supports the dollar, particularly if the Strait of Hormuz remains closed, which could keep oil prices high and bolster hawkish Fed sentiment.
Where it sits in our coverage
Our consensus target for EUR/USD is 1.075, with a range between 1.04 and 1.12. Notable firm targets include: - jpmorgan: 1.10 (Mar26) - bofa: 1.04 (Mar26) - citi: 1.08 (Mar26)
This view aligns with jpmorgan, which anticipates a stronger dollar, while diverging from bofa, which sees potential for a weaker euro. The desk's target sits at the lower end of the consensus range, reflecting a cautious stance amid current uncertainties.
How other firms see it
Firms like jpmorgan and citi are aligned in their bullish outlook on the dollar, suggesting that the Fed's tightening cycle could continue to support USD strength. Conversely, bofa holds a contrary view, expecting the euro to outperform in the near term.
The EUR/USD trajectory is closely linked to the upcoming US CPI and PPI reports, which will provide insight into inflation trends and potential Fed actions. Additionally, the ECB's rate decisions will be critical in shaping the euro's performance against the dollar.
What the calendar says
With the US CPI report scheduled for tomorrow, traders should be prepared for potential volatility in EUR/USD. This will be followed by PPI data on Wednesday, which could further influence market expectations around Fed policy.
Market Implications
Watch the 1.18 resistance level closely; a break above could signal a bullish shift, while failure to breach may lead to a pullback towards 1.1650. The upcoming US CPI report on the 14th will be critical in shaping market sentiment and positioning ahead of potential Fed actions.
From the original
FUNDAMENTAL OVERVIEW USD: The US dollar regained some ground as both Trump and Iran rejected the respective war-ending proposals calling them unacceptable and leaving the two sides miles apart on any potential agreement. Moreover, Israeli PM Netanyahu confirmed that the removal o
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4 itemsEUR/USD extends the consolidation amid widely expected ECB hikes, US-Iran stalemate
Lead — The EUR/USD pair remains in a consolidation phase as traders await clearer signals from both the ECB and the Federal Reserve. Per the full note from Giuseppe Dellamotta, the US dollar has strengthened slightly amid geopolitical tensions and higher-than-expected inflation data, while the euro faces pressure despite anticipated ECB rate hikes. The market is pricing in an 87% probability of a June rate hike from the ECB, but the desk sees limited room for the euro to rally based solely on interest rate expectations. Upcoming US Retail Sales and Jobless Claims data will be crucial in shaping market sentiment.
AUD/USD remains stuck in a range as RBA signals a pause and US-Iran stalemate extends
The desk sees AUD/USD remaining rangebound as geopolitical tensions and central bank signals create a cautious environment. Per the full note [source], the US dollar has gained support amid escalating tensions in the Strait of Hormuz, while the RBA's recent pause in rate hikes has left the Australian dollar vulnerable. With the Fed's shift away from an easing bias and the RBA's more neutral stance, the market is positioned for potential volatility as economic data releases loom. Upcoming US data, particularly the NFP report, could serve as a catalyst for movement in the pair.
Indian Rupee erases recent gains as US and Iran fail to reach an agreement. What's next?
The Indian Rupee (INR) has recently retraced gains as geopolitical tensions surrounding the US-Iran conflict weigh on market sentiment. Per the full note [source], the US dollar has regained strength amid stalled negotiations, with the Fed's shift away from an easing bias further supporting the greenback. The desk highlights that the INR's performance is closely tied to oil price movements, which are influenced by developments in the Strait of Hormuz. Upcoming inflation reports from both India and the US could serve as critical catalysts for the INR's trajectory.
USD/JPY remains stuck in a tight range amid US-Iran deal optimism and hawkish Fed risk
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