EUR/USD faces challenges due to escalating geopolitical tensions in the Middle East.
Israel and Iran continue to attack each other, defying international appeals for diplomacy and de-escalation.
US Fed is expected to maintain its policy rate steady within the 4.25%-4.50% range on Wednesday.
EUR/USD extends its losses for the second successive session, trading around 1.1540 during the Asian hours on Monday. The pair depreciates as the US Dollar (USD) gains ground amid rising safe-haven demand as geopolitical tensions escalate in the Middle East.
Israel started attacks on Iranian nuclear facilities and missile factories on Friday. Iran responded with an attack on Israel late Sunday, with an explosion seen in the coastal city of Haifa. Israel continued attacking on military targets in Iran, despite international calls for diplomacy and de-escalation, per CNN.
Moreover, Iranian media outlet Mehr News reported that Iran has started the fourth phase of operation against Israel on Sunday. Iranian officials underscored that they would “respond firmly to any adventurism” from Israel.
On Friday, the University of Michigan (UoM) showed that the Consumer Sentiment Index climbed to 60.5 in June from 52.2 prior. This reading came in above the market consensus of 53.5. The US Federal Reserve (Fed) is expected to keep its policy rate unchanged within the 4.25%–4.50% range in its upcoming decision on Wednesday. However, traders now expect a 25 basis point rate cut by September.
However, the downside of the EUR/USD pair could be restrained as the Euro (EUR) receives support from rising sentiment surrounding the European Central Bank (ECB) of pausing its easing cycle to assess the impact of new US tariffs.
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