EUR/USD

Introduction: The Calm Before the Storm

Tuesday was a day of cautious optimism for the British pound EURGBP ... and the euro. Both currencies posted modest gains as markets paused to reassess the pace of the US dollar’s appreciation. Geopolitical tensions in the Persian Gulf continue to support demand for the American currency, but investors are reluctant to make sharp moves ahead of key US inflation data.

The pound sterling rose to $1.3375, gaining 0.20%. The euro strengthened to $1.1395, adding 0.13%. These are modest moves, but they reflect an important shift in market sentiment: the dollar, which has dominated the markets in recent weeks, is beginning to lose momentum.

However, pressure from the dollar remains the dominant force. The renewed blockade of the Strait of Hormuz pushed Brent crude oil to $84 per barrel, providing additional support for the US currency. In this article, we will examine all the factors affecting the pound and the euro, assess their prospects, and attempt to determine where these currencies may move in the coming days.

The Pound: Modest Growth Driven by Broader Dollar Dynamics

A 0.20% Increase

The pound sterling rose to $1.3375, gaining 0.20%. This was a relatively small increase, but it occurred against the backdrop of a broader weakening of the dollar ahead of the release of inflation data.

The pound’s advance was driven by general US dollar dynamics rather than any factors specific to the United Kingdom. British political and economic developments had almost no impact on Tuesday’s trading.

Lack of Domestic Drivers

No significant UK economic data were published on Tuesday, and there were no notable comments from Bank of England officials. The pound moved primarily in line with broader US dollar trends.

This means that any movements in the pound over the coming days will depend on external...

Introduction: Geopolitics Takes Precedence Over Domestic Politics

Monday became a day on the foreign exchange markets when geopolitics outweighed everything else. The pound sterling weakened despite the remarkably orderly transition of power taking place in the United Kingdom. The reason was a sharp rise in energy prices caused by renewed US strikes on Iran and concerns about shipping through the Strait of Hormuz.

Investors turned to the dollar as a safe-haven asset, and this pressure proved stronger than the domestic factors affecting the British economy. GBP/USD declined by 0.11% to 1.3392, retreating from last week’s highs. The euro, by contrast, posted a modest gain, although analysts warn that the single currency’s vulnerability may become more apparent in the coming days.

What is driving this movement? Why is the energy shock having such a strong impact on the pound? And what should investors expect this week, with inflation data, congressional hearings, and the continuing Middle East crisis on the agenda?

The Dollar as a Beneficiary of the Energy Shock

US Energy Independence

Chris Turner of ING clearly identified the main reason behind the dollar’s strengthening: US energy independence. Unlike Europe and the United Kingdom, which depend on energy imports, the United States is capable of meeting its needs using its own resources.

If Iran effectively blocks the Strait of Hormuz, it will create serious problems for oil-importing countries. For the United States, however, it could become an advantage. Rising energy prices would encourage American producers to increase output, while exports of more expensive oil would generate additional revenue.

As a result, the dollar receives support not only as a safe-haven asset but also as the currency of an energy-exporting country that benefits from higher oil prices.

Demand for High-Yielding Currencies

Turner also notes that low volatility in the foreign exchange market...

Introduction: the day the greenback got even stronger

The currency market at this hour looks like a set of swings someone has violently pushed and let go. The US dollar, the world’s primary currency, has climbed to a two-month high and doesn’t seem eager to come back down anytime soon. The USD index, which measures the dollar’s strength against a basket of major global currencies, rose another 0.2% in Asian trading on Thursday, following a solid 0.6% jump on Wednesday. The last time we saw these levels was at the end of March.

So what happened? The Fed didn’t raise rates. And a peace move involving Iran was supposed to calm markets. Yet the dollar keeps rising. Behind this apparent paradox lies a complex interplay of expectations, policy signals, and geopolitical shifts that is forcing investors worldwide to rethink their strategies.

Let’s break down why the US currency is feeling so confident that Japanese authorities are already preparing their pencils for another intervention—and why a temporary agreement with Iran, which was expected to weaken the dollar, has instead reinforced it.

The Fed: a hawkish dove or a dovish hawk

A pause that sounds like a warning

The Federal Reserve meeting on Wednesday was one of those events markets wait for with bated breath, then dissect every word of the statement. Formally, everything was predictable: interest rates were left unchanged. But if you think investors were relieved, you would be mistaken.

The Fed delivered what financial markets call a “hawkish pause.” It kept rates steady but made it clear that the tightening cycle is not over. Moreover, policymakers still see room for further hikes later this year. These are not empty words.

Updated projections showed that nine out of nineteen Fed officials expect at least one rate hike by the end...

On Wednesday, June 16, 2026, an event is taking place in the foreign exchange market that most ordinary people will not even notice. But those who trade currencies know: today, large FX options are expiring. Billions of dollars, euros, yen, pesos, yuan, and reais may be exercised, not exercised, or rolled over. And depending on what happens, exchange rates could shift by tenths of a percent—or more.

This is not just a technical detail. It is a key market moment. Because options are both insurance and speculation at the same time. When they expire, the market loses support or resistance levels. Prices can move sharply. Traders holding positions may be forced to close them.

And today, on Wednesday, large options expire across several currency pairs. Let’s start with USD/JPY. The largest option is worth $1.09 billion with a strike at 158.00. Almost a billion dollars! What does this mean? The trader who bought this option has the right to buy or sell dollars at 158 yen per dollar. If the market is above 158, the option is in the money. If below, it is worthless.

In addition, options expire for $749.6 million at 157.25 and $691.1 million at 158.50. There are also USD/CNY options worth $1.8 billion at a strike of 6.7928. USD/BRL options worth $767.5 million at 5.1100. EUR/USD options worth nearly 1 billion euros at 1.1450. AUD/USD options worth 933.3 million AUD at 0.6650. USD/MXN options worth $629.5 million at 17.24.

All of these expire today. And they may affect markets.

But that’s only today. On June 18 (tomorrow), even larger options expire: EUR/USD options worth 8.73 billion euros at 1.1500! Yes, nearly 9 billion euros. No joke. And USD/JPY options worth $1.79 billion at 155.00. And USD/CAD options worth $884 million at 1.3735.

These are truly large...

Friday: A Day of Diplomatic Optimism

Throughout Thursday and Friday, currency markets remained in a state of nervous anticipation. Not the sticky fear that accompanies missile strikes, but rather a cautious hope — what if? What if the seemingly endless Middle Eastern crisis, which has flared up intermittently for months, is finally approaching its conclusion? What if Trump, known for making bold statements, is telling the truth this time? What if a peace agreement with Iran is actually signed this weekend?

Investors decided that the mere possibility was enough to act. The U.S. dollar, which had strengthened in recent weeks amid geopolitical uncertainty and expectations of further Federal Reserve tightening, gave up some of its gains on Friday. The U.S. Dollar Index (DXY) fell 0.1% during London trading, stabilizing after touching its lowest level of the week. For the week as a whole, the index is down 0.3%. Not a dramatic move, but a symbolic one: the trend has shifted.

The euro, by contrast, regained momentum. EUR/USD hovered near its highest levels of the week and appeared set to post its strongest weekly performance in more than a month. The rally was supported not only by easing geopolitical tensions but also by the European Central Bank’s first interest-rate hike in nearly three years. While the Federal Reserve remains on pause, the ECB has finally taken a step it had been discussing for months.

So what happened? Three key factors are driving the story: Donald Trump’s peace overtures toward Iran, the sharp decline in oil prices triggered by those remarks, and U.S. inflation data that turned out to be less alarming than many had feared.

Trump Hints at an Iran Deal — and Markets Believe Him

The primary catalyst came on Thursday, when Donald Trump suggested that a peace agreement between...

Tuesday: A Day of Consolidation

After Friday’s frenzy, when the U.S. dollar surged on the back of strong U.S. employment data and technology stocks tumbled, dragging risk assets down with them, Tuesday brought something traders call consolidation. No sharp moves, no panic, no euphoria—just a cautious recovery after the storm.

Sterling gained 0.44% against the dollar, reaching 1.3401. The euro added 0.29%, climbing to 1.1572. Both currencies recovered part of the losses suffered on Friday when the dollar strengthened to two-month highs. Yet no one is celebrating. This is not a victory—it is merely a pause.

The U.S. Dollar Index, which rose above 100.2 on Friday, retreated to 99.9 on Tuesday. Just 0.3% lower, but symbolically below the psychologically important 100 level. That number encapsulates the uncertainty of the current market environment. The dollar remains strong, but its rally has stalled. The euro and pound are trying to catch their breath, but every step higher remains difficult.

What is behind this calm?

First, the absence of fresh catalysts. Both the Federal Reserve and the European Central Bank have entered their pre-meeting blackout periods ahead of next week’s policy meetings. Policymakers are not giving speeches, granting interviews, or hinting at future actions. Markets are left alone with the data—and on Tuesday there was little data capable of changing the narrative.

Second, a partial rebound in technology stocks. South Korean chipmakers Samsung and SK Hynix, which plunged 8–10% on Monday, bounced back 5–11% on Tuesday. That helped calm investors’ nerves globally. Because the pound and euro are sensitive to global risk sentiment, the stabilization in equity markets gave them room to recover.

Third, surprisingly strong Chinese trade data. Exports rose 19.4% in May, while imports jumped 27.4%. This suggests the world’s second-largest economy may be showing signs of revival. For the...

An American View of a Currency That Still Cannot Take Off

Bank of America, one of the world’s largest financial institutions, has not changed its view on the euro. It looks at the single European currency with caution bordering on pessimism — not catastrophic or panicked, but rather weary and pragmatic. BofA analysts see too many factors that will weigh on the euro in the coming months, and too few that could support it.

The euro is going through a difficult period. It is not collapsing, but it is not rising either. It is moving sideways around 1.16–1.17 against the dollar, sometimes slightly higher, sometimes slightly lower. Investors who just a year ago believed in a quick return to 1.20 and above are now simply hoping it will not fall to 1.10.

BofA offers no false hopes. Its analysts believe pressure on the euro will persist at least through the second and third quarters. Only toward the end of the year, if energy markets begin to normalize and eurozone growth improves, may the single currency have a chance to recover.

But what exactly is holding the euro back? Why can a currency serving an economy of 450 million people and GDP of 15 trillion euros not strengthen against the dollar? The answers lie in three areas: energy, economic growth, and geopolitics.

Europe’s Energy Curse

The first and perhaps main reason for the euro’s weakness is Europe’s energy vulnerability. BofA says directly: Europe remains more vulnerable to rising energy costs than the United States. This is not new, but under current conditions this vulnerability is becoming critical.

Natural gas prices have historically had a much stronger impact on the eurozone economy. European industry, especially Germany’s, was built on cheap Russian gas. After the start of the war in Ukraine and the...

KEY EVENT: ECB Rate Decision — June 11  |  25bp Hike 90% Priced  |  ECB Deposit Rate 2.00%  |  Euro CPI 3.2% (May, highest since late 2023)

EUR/USD 1.1638  ·  EUR/GBP 0.8644  ·  Lead $2,014.51/T  ·  Corn 420.56¢/bu  ·  CAC 40 8,278.1  ·  AstraZeneca £13,150  ·  EU 20Y 3.48%  ·  USDT $1.0001  ·  BNB/USD $594.5

Session Overview — European Markets

Friday's European session opens with an unusual and defining tension: the euro is firming ahead of a rate hike that is already almost fully priced — a reminder that in modern markets, anticipation can both deliver and disappoint. With the European Central Bank's June 11 decision six days away and May eurozone inflation confirmed at 3.2%, the question is no longer whether the ECB will hike, but how hawkish the guidance will be and what comes next.

The macro backdrop is dense. Eurozone inflation rose to 3.2% in May — its highest reading since late 2023, with core at 2.5% and services inflation surging to 3.5%. These data points have pushed money markets to price a near-certain 25 basis-point hike at the June 11 meeting, lifting the ECB deposit rate from 2.00% to 2.25%, with a second hike priced for September and a third increasingly likely before year-end. ECB Governing Council member Isabel Schnabel on Monday added a hawkish note: it is too early to determine the exact number of rate hikes — a deliberate signal that the ECB is not inclined to front-run market guidance. Bank of Italy Governor Fabio Panetta was equally pointed: the forward-looking picture calls for a recalibration to counter the risk of persistent inflationary tensions.

Beneath the ECB narrative, the geopolitical picture remains the dominant risk overlay. Iran hostilities continue to disrupt oil supply chains and push energy-driven inflation across Europe. A conditional Lebanon...

A Small Green Ray Through the Clouds

Thursday brought a modest sense of relief to holders of British pounds and euros. After several days in which the U.S. dollar bulldozed its way through virtually every major currency, the market finally paused. Sterling gained 0.27% against the dollar, reaching 1.3459. The euro performed slightly better, rising 0.35% to 1.1640.

These are modest, almost symbolic moves. Yet after the previous day's decline, even such gains felt like a welcome gift.

Still, don't be fooled by the green numbers on the screen. The pound and the euro remain on extremely shaky ground. They resemble a person walking across thin ice—every next step could be the last. The fundamental drivers behind these currencies have not changed. The dollar remains strong. Geopolitical risks remain severe. And economic data from Europe and the UK continue to disappoint.

On Thursday, the dollar merely took a breather. Investors paused ahead of Friday's key event—the U.S. nonfarm payrolls report. This release could either reinforce the dollar's recent momentum or call it into question. Few traders are willing to establish major positions ahead of such uncertainty. As a result, the dollar stood still while the pound and euro managed a modest rebound.

But let's take a closer look. Why does sterling remain so vulnerable? Why is the euro struggling to strengthen despite its gains? And what lies ahead for these currencies after the U.S. employment data is released?

Sterling: Recovering After a Blow

Let's begin with the pound. Thursday's modest rise followed a sharp decline the previous day.

On Wednesday, sterling fell heavily after disappointing UK services-sector PMI data.

The figures were alarming. For the first time in more than a year, the index dropped below the psychologically important 50-point threshold. A reading above 50 signals expansion; below 50 indicates...

Tuesday’s New York cut. For most people, it’s simply the close of the U.S. trading session. For FX traders, it’s a moment of truth. Options contracts worth billions of dollars are set to expire, and these expiries often exert an almost gravitational pull on spot exchange rates, drawing them toward specific levels. Market makers hedging their positions will do everything possible to keep prices near major strikes. Once the options expire, however, those anchors disappear—and the market may make a sharp move. Let’s look at the key currency pairs and where the traps are set today.

EUR/USD: Nearly €2 Billion at 1.1850

The main magnet for the euro today sits at 1.1850, where options totaling €1.82 billion are due to expire. This is not just a large expiry—it is a gravitational anomaly. The spot rate could be pulled toward this level during the final hours before the New York cut.

Additional anchors include €1.51 billion at 1.1750 and €1.27 billion at 1.1700. Together, these levels create a web of attraction within which the pair may fluctuate. Market makers will actively manage their positions to minimize payouts on expiring contracts. If EUR/USD trades below 1.1850, they may buy euros and push the price higher; if it trades above, they may sell and pull it back toward the strike. This is classic options-related gravity, making sharp moves before expiry less likely.

Notably, an even larger expiry is scheduled for Wednesday: €2.47 billion at 1.1710. This suggests that even after Tuesday’s cut, the market will not gain complete freedom—the next anchor is already waiting.

USD/JPY: 160.00 Is the Red Line

For dollar-yen, the primary magnet is 160.00, where $1.59 billion in options expire. The 160 level is the same red line that triggered large-scale foreign exchange intervention by the...