EUR/USD traded sideways near 1.1540 in early Asian dealing on Tuesday, staying below 1.1550. Markets focused on US President Donald Trump’s deadline linked to the reopening of the Strait of Hormuz, with US Durable Goods Orders and ADP Employment reports due later on Tuesday.
On Monday, Trump said a US ceasefire proposal with Iran was “not good enough”. He said the US could target Iran’s power plants and bridges on Tuesday if the waterway is not reopened, with a deadline set for 8 p.m. Eastern Time (00:00 GMT Wednesday).
Hormuz Deadline Drives Market Focus
Ongoing Iran-related tensions kept demand for safe-haven assets in view, which can support the US Dollar and weigh on EUR/USD. Traders continued to watch for further escalation around the Strait of Hormuz.
US data on Monday showed softer service-sector activity. The ISM Services PMI fell to 54.0 in March from 56.1 in February, below expectations of 55.0.
In Europe, expectations for European Central Bank policy moved firmer due to energy-driven inflation. Markets are pricing in 2–3 interest rate hikes for 2026, compared with earlier expectations that rates would be held.
We remember how last year, around this time in 2025, geopolitical tensions surrounding the Strait of Hormuz deadline created significant uncertainty. The EUR/USD pair was holding above 1.1500, with traders bracing for a potential safe-haven rush into the dollar. That situation showed us how quickly geopolitical risk can dominate market focus.
Shift From Acute Crisis To Persistent Headwinds
Today, the direct threat in the Strait of Hormuz has subsided, but the demand for the dollar as a safe haven persists due to other global pressures. While the acute crisis of 2025 is behind us, ongoing trade friction and regional instability continue to provide a floor for the dollar. This creates a different, more persistent headwind for EUR/USD compared to the sharp, event-driven risk we saw last year.
Looking back, markets in 2025 were just beginning to price in European Central Bank rate hikes for 2026. The ECB has since delivered two of those hikes as core inflation has remained stubbornly high, with the latest March 2026 reading from Eurostat showing a rate of 3.1%. This policy action has provided underlying support for the euro, preventing a steeper decline.
However, the weak US services data we saw in March 2025 has not translated into a broader economic slowdown. In fact, the US economy has shown resilience, with the most recent jobs report for March 2026 adding a solid 215,000 jobs, keeping the Federal Reserve on a hawkish path. This contrasts with the loss of momentum we were watching last year.
Given that both central banks are now actively fighting inflation, volatility in EUR/USD is likely to increase around data releases. Derivative traders might consider using options to trade the swings, particularly around upcoming central bank meetings and inflation reports. With the pair now trading near 1.0750, the dynamic is less about a single geopolitical event and more about the race between central banks.
