The Euro rebounded above 1.1500 against the US Dollar, trading near 1.1515 during early Asian hours, as risk sentiment improved following news that US President Donald Trump and Iran’s Masoud Pezeshkian signed a memorandum of understanding (MOU) to end the US-Israel war on Iran. The agreement was electronically signed by the two leaders after Iranian parliamentary speaker Mohammad Bagher Ghalibaf and US Vice-President JD Vance signed on Sunday. A formal signing is expected on Friday in Geneva, according to Bloomberg. The MOU includes provisions for Tehran to allow commercial ships to pass safely and toll-free for 60 days, after which Iran will engage in dialogue with Oman and other Gulf states regarding future maritime administration in Hormuz [1][2].
Simultaneously, the US Federal Reserve, in its first meeting under Chairman Kevin Warsh, unanimously voted to hold its benchmark federal funds rate at 3.5% to 3.75%. Warsh emphasized that 'price stability' would be the Fed’s guiding principle. Despite holding rates steady, the Fed signaled the possibility of higher rates later this year, with money markets fully pricing in a rate hike by October and the CME FedWatch Tool indicating a 78% chance of a hike in December, up from 61% before the decision [1][2].
The hawkish tone from the Fed put pressure on gold prices, causing XAU/USD to tumble to around $4,280 during the early Asian session. Gold, which does not yield interest, becomes less attractive in a higher-rate environment. The prospect of a US-Iran peace agreement is seen as supportive for riskier assets like the Euro, while the Fed’s stance may cap further gains in EUR/USD and weigh on gold [1][2].
Traders are also awaiting the US Initial Jobless Claims report, which could further influence market direction. The combination of geopolitical de-escalation and monetary policy uncertainty is driving significant moves in both currency and commodity markets [1][2].
CONCLUSION
The Euro strengthened on optimism over a US-Iran peace breakthrough, while gold prices slumped as the Fed held rates but signaled a possible hike later this year. Market sentiment is cautiously positive for risk assets, but the Fed’s hawkish outlook and upcoming economic data could limit further gains.