{"id":24362,"date":"2025-06-13T10:22:41","date_gmt":"2025-06-13T10:22:41","guid":{"rendered":"https:\/\/www.vtmarkets.com\/?p=24362"},"modified":"2025-06-13T10:22:41","modified_gmt":"2025-06-13T10:22:41","slug":"euro-retreats-from-3-5-year-high-to-middle-east-crisis","status":"publish","type":"post","link":"https:\/\/www.vtmarkets.com\/en-ca\/analysis\/euro-retreats-from-3-5-year-high-to-middle-east-crisis\/","title":{"rendered":"Euro Retreats from 3.5-Year High to Middle East Crisis"},"content":{"rendered":"\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"559\" src=\"https:\/\/www.vtmarkets.com\/en-ca\/wp-content\/uploads\/sites\/13\/2026\/03\/image_fx-80-1024x559.png\" alt=\"\" class=\"wp-image-20946\"\/><\/figure>\n\n\n\n<p><strong>Key Points<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>EUR\/USD eases to $1.153 after peaking at $1.16316<\/li>\n\n\n\n<li>ECB signals pause, while Fed rate cut bets rise amid soft U.S. inflation<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity is-style-dots\"\/>\n\n\n\n<p>The euro retreated to $1.15329 on Friday, cooling off after hitting a three-and-a-half-year high of $1.16316 on Wednesday. The reversal comes as markets absorb the shock of Israel\u2019s latest military strike on Iranian nuclear sites\u2014an attack that killed key figures and sparked a barrage of retaliatory drone launches from Tehran. The heightened geopolitical tension triggered a global flight to safety and weakened appetite for risk-linked currencies, including the euro.<\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter\"><div class=\"wp-block-embed__wrapper\">\n<blockquote class=\"twitter-tweet\" data-width=\"500\" data-dnt=\"true\"><p lang=\"en\" dir=\"ltr\">Israel hits Yemen&#39;s main airport in airstrike against Houthis <a href=\"https:\/\/t.co\/IQGPOmbmN3\">https:\/\/t.co\/IQGPOmbmN3<\/a> <a href=\"https:\/\/t.co\/IQGPOmbmN3\">https:\/\/t.co\/IQGPOmbmN3<\/a><\/p>&mdash; Reuters (@Reuters) <a href=\"https:\/\/twitter.com\/Reuters\/status\/1919814726915109048?ref_src=twsrc%5Etfw\">May 6, 2025<\/a><\/blockquote><script async src=\"https:\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script>\n<\/div><\/figure>\n\n\n\n<p>Despite the pullback, the euro remains fundamentally underpinned by recent signals from the European Central Bank. Officials have hinted at a potential pause in the easing cycle, as they <a href=\"https:\/\/t.co\/aEQHDqefup\" target=\"_blank\" rel=\"noopener\" title=\"\">assess the economic fallout from newly imposed U.S. tariffs<\/a>. The prospect of policy stability\u2014against a backdrop of inflation resilience in core eurozone economies\u2014has attracted investors seeking currency alternatives to the dollar.<\/p>\n\n\n\n<p>Meanwhile, the U.S. dollar has come under pressure. Soft CPI data earlier in the week coupled with trade uncertainty from President Trump\u2019s tariff strategy has fuelled speculation that the <a href=\"https:\/\/t.co\/X0CkaE5XgG\" target=\"_blank\" rel=\"noopener\" title=\"\">Federal Reserve could begin cutting rates as early as September<\/a>. This divergence in monetary policy outlooks has widened interest rate differentials, offering a degree of support for the single currency.<\/p>\n\n\n\n<p>However, escalating conflict in the Middle East and its potential ripple effects on global growth, inflation, and risk sentiment may limit the euro\u2019s upside in the near term. Traders appear to be rotating into safe-haven currencies, with renewed demand for the Swiss franc and Japanese yen.<\/p>\n\n\n\n<h2 class=\"wp-block-heading has-medium-font-size\">Technical Analysis<\/h2>\n\n\n\n<p>The pair rallied from around 1.1480 to a high near 1.1630 earlier, with steep MACD histogram expansion and a bullish mid\u2011term moving average crossover confirming strong momentum. However, resistance emerged at the 1.1630 zone, coinciding with the ECB\u2019s June 5 rate cut, which sparked a sharp reversal. The MACD lines turned downward and a shallow correction ensued, pulling price back toward the 1.1540\u20131.1550 level. That area has acted as intraday support so far, and the MACD histogram is starting to flatten\u2014suggesting consolidation rather than a full reversal.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/www.vtmarkets.com\/en-ca\/wp-content\/uploads\/sites\/13\/2026\/03\/image-16-1024x444.jpg\" alt=\"\" class=\"wp-image-24363\"\/><\/figure>\n\n\n\n<p class=\"has-text-align-center\"><em>Picture: EUR\/USD reverses off ECB\u2011driven high, eyes support at 1.1540, as seen on the <a href=\"https:\/\/vtmarketsapp.onelink.me\/CD7D\/240525WA\" target=\"_blank\" rel=\"noopener\" title=\"\">VT Markets app<\/a><\/em><\/p>\n\n\n\n<p>From a broader perspective, the European Central Bank\u2019s recent 25bp rate cut to 2% marks the eighth easing move this cycle. The dovish policy and weakened eurozone fundamentals (slowing growth, below-target inflation) pressured EUR\/USD higher initially on speculation the Fed would lag, but this quickly reversed as markets digested the implications of diverging interest rate paths.<\/p>\n\n\n\n<p>Unless tensions de-escalate or U.S. data continues to underwhelm, EUR\/USD could consolidate within the 1.148\u20131.158 range in the short term. Markets are also closely monitoring further ECB commentary, with any firm signal on policy normalisation likely to provide renewed directional cues for the euro.<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/www.vtmarkets.com\/trade-now\/\">Create your live VT Markets account<\/a><\/strong><strong> and <\/strong><strong><a href=\"https:\/\/myaccount.vtmarkets.com\/login?_gl=1*1azgbap*_gcl_au*NjE5NTE3MjY4LjE3NDQ2MDA3NDI.*_ga*MTY4OTgwNTU5Mi4xNzM2NzQ2MTgy*_ga_J26NL1ZVX7*czE3NDQ5NDQ0NTYkbzEyMCRnMCR0MTc0NDk0NDQ1NiRqNjAkbDAkaDA.\">start trading<\/a><\/strong><strong> now.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The euro slipped to $1.153 amid escalating tensions in the Middle East and speculation over diverging ECB-Fed policy paths. &#8211; vtmarkets.com<\/p>\n","protected":false},"author":64,"featured_media":20946,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[31],"tags":[56,10],"class_list":["post-24362","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-analysis","tag-euro","tag-forex"],"acf":{"acf_article_selection_author":""},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/24362","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/64"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=24362"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/24362\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/20946"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=24362"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=24362"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=24362"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}