Euro declines to near 1.1400 as US launches fresh strikes on Iran

• EUR/USD trades with mild losses near 1.1410 in Tuesday’s early Asian session. 

• US launched fresh strikes on Iran; the Houthis announced a maritime embargo. 

• Traders see low odds of a US rate hike at the Fed’s July meeting. 

The EUR/USD pair posts modest losses around 1.1410 during the early Asian trading hours on Tuesday. Renewed tensions between the United States (US) and Iran continue to fuel risk-off sentiment, weighing on the Euro (EUR) against the US Dollar (USD). The ZEW surveys from Germany and the Eurozone are due later on Tuesday.  Also, the US ADP employment report will be released. 

The Guardian reported that the US has launched the 10th round of attacks against Iran on Tuesday. The US military said that it had struck “military command centres, air defence and coastal surveillance sites, maritime capabilities, missile and drone launch sites, and communications networks.”

Iran launched attacks against Bahrain and Kuwait, in addition to striking tankers in the Strait of Hormuz. Meanwhile, Yemen’s Iran-backed Houthi rebels announced a maritime embargo of Saudi Arabia. Escalating tensions and fears of wider conflicts in the Middle East could boost a safe-haven currency such as the Greenback and act as a headwind for the major pair in the near term. 

On the other hand, signs of cooling US inflation data might lower the possibility of a US rate hike later this year. This, in turn, could undermine the USD. Markets continue to expect no change to rates at the Fed's next meeting on July 29, with Fed funds futures pricing an implied 84.5% chance of a hold, compared to a 61.5% odds a month ago, according to the CME FedWatch tool.