The Euro (EUR) trims a part of its intraday losses against the US Dollar (USD) on Tuesday as the Greenback loses momentum, with traders repositioning ahead of the Federal Reserve’s (Fed) interest rate decision due on Wednesday, while continuing to monitor developments in the Middle East. At the time of writing, EUR/USD is trading around 1.1707, rebounding from an intraday low of 1.1677.
Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is trading around 98.66, easing from a daily high of 98.88, up nearly 0.18% on the day. However, the downside remains limited amid persistent uncertainty surrounding US-Iran tensions and firm US Treasury yields, which continue to underpin the Dollar.
The Fed is widely expected to keep interest rates unchanged in the 3.50%-3.75% range, with the outcome largely priced in by markets. Instead, the focus will be on forward guidance, as policymakers navigate risks to both sides of their dual mandate. The recent surge in Oil prices is feeding into inflation expectations, a trend increasingly reflected in recent economic data. This has prompted traders to shift toward a higher-for-longer rate outlook, compared with earlier expectations of two rate cuts before the US-Iran war escalated.
At the same time, traders are pricing in at least two rate hikes by the European Central Bank (ECB) amid mounting inflation risks from higher Oil prices, although the central bank is expected to hold rates steady at 2.00% at Thursday’s meeting as policymakers balance persistent inflation pressures against risks to economic growth, particularly given the Eurozone’s reliance on imported energy.
ECB Bank Lending Survey for the first quarter of 2026, released on Tuesday, showed inflation expectations rising across horizons. Inflation expectations one year ahead rose sharply to 4.0% in March from 2.5% in February, while expectations three years ahead increased to 3.0% from 2.5%, and five-year expectations edged up to 2.4% from 2.3%.
On the geopolitical front, efforts to end the US-Iran war appear to have stalled, with the Strait of Hormuz still largely disrupted, keeping Oil supply tight. Iran is expected to submit a revised peace proposal in the coming days, according to CNN, citing sources, after US President Donald Trump and his national security team expressed skepticism over Tehran’s earlier offer, which deferred nuclear negotiations to a later stage.
Economic Indicator
Fed Interest Rate Decision
The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).
Read more.
Next release:
Wed Apr 29, 2026 18:00
Frequency:
Irregular
Consensus:
3.75%
Previous:
3.75%
Source:
Federal Reserve
Editorial note: This recovered market brief has been cleaned and reclassified by Next Move Markets for educational market intelligence. It is not investment advice.
Next Move Markets desk view
For active traders, this brief should be read through the lens of currency markets rather than as a standalone headline. The key question is whether the theme behind EUR/USD rebounds as Fed decision nears and US-Iran tensions cap Dollar downside can influence positioning beyond the first reaction. That means watching central-bank expectations, yield differentials, dollar momentum and risk appetite together, not in isolation.
A richer trading read comes from separating the catalyst from confirmation. The catalyst explains why markets are paying attention; confirmation comes from price action, liquidity and cross-asset behavior after the headline is digested. If those signals do not align, traders should treat the move as fragile and keep risk tighter.
What traders should watch next
- Whether the move is confirmed by the U.S. dollar index and short-term rate expectations.
- How London and New York liquidity react once the initial headline risk is absorbed.
- Whether price action respects the latest support and resistance zones instead of fading immediately.
- Any follow-up comments from central-bank officials or data releases that change the rate path.
Risk context
This article is a market-intelligence brief, not a trade recommendation. Before acting on the theme, traders should define invalidation, position size and the time horizon of the setup. The same headline can support a short-term reaction and still fail as a multi-session trend if liquidity, policy expectations or broader sentiment move the other way.
Scenario map
The base case is that traders keep this theme on the radar while waiting for confirmation from central-bank expectations, yield differentials, dollar momentum and risk appetite. A stronger continuation scenario requires follow-through after the first reaction, preferably with related assets moving in the same direction. A failure scenario develops if the headline is quickly absorbed, volatility fades and price returns inside the previous range.
For currency markets, the most useful approach is to compare the article theme with live market behavior. If the market confirms the narrative, pullbacks can become more constructive. If the market rejects it, the headline becomes background noise rather than a trading driver.
Execution discipline
- Define the level first: traders should know where the idea is invalidated before thinking about upside or downside.
- Separate news from setup: EUR/USD rebounds as Fed decision nears and US-Iran tensions cap Dollar downside may explain attention, but entry quality still depends on timing, liquidity and risk/reward.
- Watch confirmation: a clean move usually appears across related markets, not only in one isolated instrument.
- Control exposure: if volatility expands, smaller position sizing can be more professional than chasing the headline.
Next Move Markets treats this kind of brief as a starting point for preparation: identify the driver, map the scenarios, then wait for the market to prove which path is actually being priced.
