The US Dollar (USD) began the week on a weaker note, with the US Dollar Index (DXY) dropping to two-week lows and breaking below the 99.00 support level, trading at 98.99 and down 0.33% during Monday’s session [1][2]. This decline was attributed to a generalized improvement in risk sentiment, driven by optimism over a potential US-Iran deal and hopes for an extension of the ceasefire by 60 days, as well as discussions on Iran’s uranium enrichment program [1][2]. The EUR/USD pair advanced to multi-day highs, trading at 1.1645 and revisiting the 1.1650 zone, up 0.37% on the day [1][2].
The weakening of the Greenback was further fueled by a sharp drop in West Texas Intermediate (WTI) crude oil prices, which fell nearly 5.50% to $91.66 per barrel, approaching three-week lows near the $90.00 mark [1][2]. This oil slump contributed to the Euro’s strength, as the Euro is positively correlated with the US Dollar [2]. US equity futures also climbed in response to the improved risk environment [2].
Other major currency pairs responded to the broad-based risk-on sentiment: GBP/USD reversed two daily pullbacks and surpassed the 1.3500 level, while AUD/USD rose sharply to flirt with multi-day peaks near 0.7180 [1]. USD/JPY consolidated near the 159.00 area after two consecutive daily declines [1]. The strong retracement in the USD also supported gold prices, pushing the troy ounce closer to the $4,600 mark [1].
The Eurozone and US economic calendars were light due to holidays, but several European Central Bank (ECB) policymakers made statements. ECB’s Yannis Stournaras suggested that a temporary overshoot of the ECB’s inflation target might warrant cautious tightening, while Martin Kocher indicated a rate hike is necessary if the 2% medium-term target is unattainable [2]. The European Commission projected Eurozone economic growth to slow to 0.9% in 2026 from 1.3% last year, with inflation rising to 3% from 1.9%, above the ECB’s 2% target [2]. Money markets have priced in two ECB interest rate hikes by year-end, with a 77.64% probability of the first hike at the June 11 meeting [2].
Looking ahead, the US economic docket will feature the Conference Board’s Consumer Confidence gauge, housing data, Durable Goods Orders, the Q1 2026 GDP second estimate, jobs data, and the Fed’s preferred inflation gauge, the Core PCE Price Index [1][2]. In the Eurozone, upcoming events include ECB policymaker speeches and the Business Climate and Consumer Confidence reports for May [2].
CONCLUSION
The US Dollar’s sharp decline, driven by optimism over a potential US-Iran ceasefire and a significant drop in oil prices, has boosted the Euro and other major currencies. Market sentiment remains risk-on, with traders closely watching upcoming US and Eurozone economic data and central bank signals for further direction.