EUR/USD gains as Dollar weakens, traders eye US CPI and US-Iran negotiations

• EUR/USD rises for a fourth straight day as the US Dollar weakens after the US-Iran ceasefire, despite lingering uncertainty.
• Traders remain cautious over the durability of the ceasefire after Iran said three points of the agreement had already been violated.
• US data shows mixed signals, with inflation easing but growth slowing.

The Euro (EUR) trades on the front foot against the US Dollar (USD) on Thursday as the Greenback remains under pressure following the US-Iran ceasefire and hopes for de-escalation. At the time of writing, the pair is trading around 1.1676, extending gains for the fourth straight day.

The Euro’s strength appears to be driven largely by US Dollar dynamics. However, the pair lacks strong follow-through buying as uncertainty over the durability of the ceasefire keeps investors cautious, preventing traders from placing aggressive bearish bets on the US Dollar.

The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is trading around 98.93, holding firm after sliding to a one-month low near 98.50 on Wednesday.

Meanwhile, traders showed little reaction to the latest US economic data as geopolitical tensions continued to dominate market sentiment. Core Personal Consumption Expenditures (PCE) inflation rose by 0.4% MoM in February, in line with expectations, while the annual rate eased to 3.0% from 3.1%.

The final Q4 Gross Domestic Product (GDP) growth was revised lower to 0.5% from 0.7%. Initial Jobless Claims came in at 219K above expectations of 210K.

The data suggest that the Fed’s preferred inflation gauge eased slightly in February but remains well above the 2% target, signaling a slow disinflation process and supporting the case for the Federal Reserve (Fed) to remain on hold.

At the same time, softer GDP growth points to some cooling in economic activity, highlighting the challenge for policymakers between controlling inflation and supporting growth at a time when labor market risks are tilted to the downside.

Attention now turns to the US Consumer Price Index (CPI) data due on Friday, with economists expecting the headline CPI to rise by 0.9% MoM, up from 0.3% in February, while annual inflation is seen accelerating to 3.3% from 2.4%.

On the geopolitical front, markets now await US-Iran talks scheduled for Saturday in Pakistan, with uncertainty lingering over the ceasefire after Iran said three points of the agreement had already been violated following Israeli strikes on Lebanon. Iran’s President Masoud Pezeshkian warned that attacks on Lebanon would undermine the ceasefire and render negotiations meaningless.