24.06.2025 12:59

Hopes of a ceasefire between Israel and Iran, as declared by US President Trump, sent shockwaves through global markets, propelling the EUR/USD exchange rate above 1.16. Trump's proposed plan, involving a 12-hour weapons standstill by each nation consecutively, aimed for a 24-hour cessation of hostilities. However, the situation remains highly volatile due to the absence of confirmation from Israel, and ongoing reports of further Iranian attacks.

Despite the lack of a confirmed agreement, market reaction was swift. The US dollar weakened significantly against the euro, while oil prices also experienced a decline. This observation, according to Commerzbank's FX analyst Antje Praefcke, underscores the immediate market sensitivity to even unverified peace initiatives in the Middle East.

Prior to this news, the US dollar had enjoyed broad gains. Commerzbank attributed this strength to rising oil prices bolstering US terms of trade, and to the dollar's persistent safe-haven status, albeit somewhat eroded recently. Sunday's demonstration of US military might, combined with a potential market underestimation of the US economic situation, might also have contributed to the dollar's earlier strength, Praefcke suggested.

Should the Middle East conflict truly de-escalate, the analyst believes President Trump's attention could quickly shift back to his ongoing feud with Federal Reserve Chairman Jerome Powell. Powell's semi-annual testimony before the House Committee on Financial Services today will be closely watched, particularly regarding the Fed's monetary policy stance in the face of potential government pressure for lower interest rates. This impending clash could generate significant market turbulence, as counter-pressure from Powell against governmental influence on interest rate decisions is anticipated.