EUR/USD extended its rebound from the 1.1100 area, described as a fresh low since May 2025, rising for a third session and moving beyond 1.1200 in Asian trading. The euro found support in the European Central Bank’s hawkish outlook, with a December rate rise described as firmly in play as energy-driven inflation risks increased. The US dollar eased from a two-week high as hopes of Middle East diplomacy and lower US bond yields weighed on it, although tensions persisted with reports of escalating hostilities between Houthis in Yemen and Saudi Arabia.
Geopolitical Developments and Market Reactions
Geopolitical risk stayed in focus after US Vice President JD Vance sent a letter to Mohsen Rezaei, while Qatari mediators delivered Iran a draft deal to end the war with the US and Israel. Iran’s navy said four oil tankers hit sea mines in the Strait of Hormuz, keeping crude elevated and reinforcing inflation concerns alongside hawkish Federal Reserve expectations. CME Group’s FedWatch shows markets pricing about a 75% chance of a December hike, while US data put Q3 growth at 3.4% annualised and September inflation above the 2% target. Technically, the pair stalled near the 100-period EMA on the four-hour chart; a break above 1.1211 is flagged as the level needed to ease downside pressure.
