The US Dollar gained significant strength on Thursday, pressuring both the Euro and the British Pound, as uncertainty over US-Iran negotiations and robust US economic data dominated market sentiment. The EUR/USD pair fell to near six-week lows around 1.1585, down from an intraday high of 1.1635, while GBP/USD dropped by about 0.20% to 1.3406 after peaking near 1.3455 earlier in the session [1][2].
Geopolitical tensions escalated after reports from two senior Iranian sources indicated that Iran’s Supreme Leader had ordered near-weapons-grade uranium to remain inside the country, complicating ongoing negotiations with Washington. However, there was a discrepancy as an Iranian official later denied these claims, adding to market volatility [1][2]. Oil prices surged in response, with West Texas Intermediate (WTI) rising over 2.60% to $101.66 per barrel, fueling inflation concerns and supporting the US Dollar Index (DXY), which traded at 99.40–99.43, its highest level since April 7 [1][2].
The Federal Reserve’s latest meeting minutes revealed a split among policymakers, with most favoring holding rates steady but some open to a rate hike if the energy supply shock from the Iran conflict persists [2]. Elevated oil prices and inflation fears have pushed US Treasury yields higher, with the benchmark 10-year yield near 16-month highs [1]. In the Eurozone, rising energy costs are raising concerns about economic growth and limiting the European Central Bank’s ability to raise rates aggressively [1].
On the macroeconomic front, US data was strong: the S&P Global Manufacturing PMI rose to 55.3 in May from 54.5, a 48-month high, and Initial Jobless Claims fell to 209K, below estimates [1][2]. The US Composite PMI held steady at 51.7, while the Services PMI edged down to 50.9 from 51 [1]. In contrast, the Eurozone’s Composite PMI dropped to 47.5, a 31-month low, and the UK’s Composite PMI contracted to 48.5 from 52.6, below expectations, signaling potential economic contraction [1][2].
Looking ahead, the UK will release Retail Sales data on Friday, and US traders are watching the University of Michigan Consumer Sentiment and the swearing-in of the new Fed Chair, Kevin Warsh [2]. Technical analysis for GBP/USD shows the pair trading below key moving averages, with a soft RSI near 45, indicating fading bullish momentum despite the broader uptrend remaining intact [2].
CONCLUSION
Uncertainty over US-Iran negotiations and strong US economic data have driven the US Dollar higher, pressuring both the Euro and the Pound. Elevated oil prices and weak European and UK PMI data have intensified concerns about economic growth outside the US. Market sentiment remains cautious as traders await further economic releases and developments in the Middle East.