The euro is facing renewed pressure on international currency markets as geopolitical tensions in the Middle East and stronger U.S. economic performance continue to drive investors toward the U.S. dollar.
At the start of the trading session, the EUR/USD exchange rate remained below the key 1.18 level, a threshold analysts consider a strong resistance point. The euro’s inability to break above that level reflects growing bearish sentiment, as traders increasingly favor the dollar as a safe-haven currency.
Market volatility is being fueled primarily by ongoing tensions between the United States and Iran, where uncertainty over potential negotiations, ceasefires and military developments has created instability across global financial markets.
A central concern remains the Strait of Hormuz, one of the world’s most critical energy corridors. Any disruption in this region has direct implications for global oil and gas supply, and therefore inflation.
Oil prices remain elevated despite recent fluctuations, with West Texas Intermediate crude stabilizing near $95 per barrel. Analysts say this level indicates that markets are still pricing in prolonged geopolitical risk and potential supply disruptions.
Higher energy prices are also reinforcing the strength of the U.S. dollar.
Investors believe that sustained high oil prices could keep inflation in the United States above the Federal Reserve’s targets, reducing the likelihood of interest rate cuts in the near term and supporting a stronger dollar.
At the same time, economic data from Europe is raising concerns.
Recent figures show that the Eurozone’s composite Purchasing Managers’ Index (PMI) dropped to 48.6, indicating contraction in economic activity. The decline is particularly visible in the services sector, which had previously shown resilience.
Europe’s largest economies are also showing signs of strain.
Germany continues to face industrial slowdown, while France is experiencing weaker domestic demand and declining business activity. This broader economic weakness is making the euro less attractive compared to the U.S. currency.
In contrast, the United States is reporting stronger-than-expected economic performance.
PMI data shows expansion in both manufacturing and services, while retail sales increased by approximately 1.7%, signaling continued strength in consumer spending—one of the main drivers of the U.S. economy.
Currency analysts say the EUR/USD pair is now entering a critical phase.
If the euro falls below support levels around 1.17 and 1.165, further declines could follow as traders increase short positions.
Attention is now turning to upcoming meetings of the Federal Reserve and the European Central Bank, which could shape the next major move in currency markets.
While both central banks are expected to keep interest rates unchanged, any shift in tone regarding inflation or economic outlook could trigger sharp market reactions.
For now, the balance appears tilted in favor of the U.S. dollar, as geopolitical risks, high energy prices and stronger economic data continue to weigh on the euro.
Analysts warn that as long as these factors persist, the euro is likely to remain vulnerable to further volatility in the days ahead.