During the Asian session on Monday, the EUR/USD pair opened higher and extended gains, currently stabilizing around the 1.1640 level, up approximately 0.34%. Improved market risk sentiment, driven by solid expectations of an imminent U.S.-Iran agreement, has weakened safe-haven demand for the U.S. dollar. The U.S. Dollar Index (DXY) edged lower and is holding near recent lows around 99.00.

U.S.-Iran Negotiations: Trump Claims Deal is "Mostly Done" but is "In No Rush" Expectations for a U.S.-Iran agreement have intensified. Over the weekend, U.S. President Donald Trump stated on social media that a deal with Iran is "mostly done," including provisions to reopen the Strait of Hormuz. Trump added, "The final aspects and details are currently being discussed and will be announced soon," bolstering investor confidence in an imminent agreement. Media reports suggest the draft deal's core elements include a 60-day ceasefire extension, Iran clearing mines from the Strait, the U.S. lifting its blockade on Iranian ports, and granting some sanctions exemptions. A U.S. official described the arrangement as "performance for relief," indicating economic sanctions relief would follow verified Iranian actions, not precede them. The draft also reportedly includes an Iranian commitment not to pursue nuclear weapons and to negotiate a suspension of its uranium enrichment program and the transfer of its stockpile of highly enriched uranium. However, in a subsequent post, Trump stated he was "in no rush" for a deal because "time is on America's side." He emphasized that the U.S. blockade of the Strait of Hormuz would "remain fully in effect and enforced" until an agreement is reached, confirmed, and signed. White House officials later indicated that a signing was still "days away," and the deal still required approval from Iran's Supreme Leader Ayatollah Ali Khamenei. Iran's Fars News Agency questioned Trump's statements, calling remarks about the Strait "incomplete" and stressing that even with a deal, the Strait would remain under Iranian "management," not revert to its pre-conflict "free passage" status. Fundamental disagreements on nuclear issues persist—the U.S. insists Iran must first abandon its stockpile of highly enriched uranium, while Iran has clearly stated the current memorandum of understanding "does not involve nuclear issues at all at this stage." This cycle of "optimistic statements" and "substantive deadlock" keeps uncertainty elevated in global energy markets.

Oil Price Drop Weakens Fed Rate Hike Expectations Rising expectations for a U.S.-Iran deal have had an immediate impact on energy markets. U.S. West Texas Intermediate (WTI) crude futures and Brent crude futures both fell over 5%, with WTI trading around $91.50 per barrel and Brent around $98.40 per barrel. The direct transmission effect of the oil price plunge is a cooling of market expectations for further monetary policy tightening by the Federal Reserve. Falling energy prices alleviate near-term inflationary pressures, thereby reducing the urgency for interest rate hikes. According to the CME FedWatch Tool, the market-implied probability of the Fed raising rates at least once this year has retreated to around 57% from 67% last Friday. Meanwhile, the probability of the Fed holding rates steady at its June meeting remains as high as 97.3%. However, significant divergence remains regarding the subsequent policy path. Recent pricing in bond markets has reversed—with Kevin Warsh taking over as Fed Chair, investors increasingly believe the Fed will prioritize maintaining its inflation-fighting credibility over responding to government expectations for rate cuts. Notably, there is a clear disconnect between market judgment and the view of White House Chief Economic Advisor Hassett. Hassett stated that a U.S.-Iran deal and a significant drop in energy prices would create "significant room" for the Fed to lower interest rates. He suggested that after energy prices retreat, the U.S. might even experience "negative inflation." However, most institutions remain cautious about the downside potential for oil prices. Some analysts point out that even if a deal is successfully reached, oil prices may remain above $90 per barrel through year-end, with inflationary diffusion pressures persisting throughout the second half of the year. The head of the UAE's national oil company warned that even if the conflict ended now, oil shipments through the Strait of Hormuz could not fully recover until the first or second quarter of 2027. This implies that supply-side constraints are unlikely to be truly loosened in the near term.

Eurozone: ECB Officials Hint at Rising Inflationary Pressure In the Eurozone, comments from several European Central Bank (ECB) officials point to rising near-term inflationary pressure, increasing market expectations for future rate hikes. ECB policymaker and Belgian National Bank Governor Pierre Wunsch stated last week that the central bank needs to act at some point because "we are at the beginning of an inflation problem." This echoes the hawkish stance of German Bundesbank President Joachim Nagel, who bluntly stated, "We are no longer in the baseline scenario of the Eurosystem projections but are moving towards an adverse scenario." Nagel warned that supply shocks typically take about 18 months to fully transmit across all goods categories, meaning the Eurozone will continue to face significant inflationary pressure. ECB Executive Board member Isabel Schnabel also noted that due to inflation being "still fresh in memory," the pass-through of energy prices to core inflation in this cycle might be faster than during the 2021-2022 period. Meanwhile, the ECB's "baseline scenario" from March (assuming the war ends in April and the energy shock is mild) has essentially been invalidated, replaced by an "adverse scenario" of economic slowdown and surging inflation. Latest data shows the Eurozone's preliminary May Composite PMI unexpectedly fell to 47.5, remaining in contraction territory for the second consecutive month. However, input price inflation accelerated to a three-and-a-half-year high, and firms raised their selling prices at the fastest pace in 38 months. This "stagflationary" combination of economic contraction and surging inflation is reshaping market expectations. Reports indicate a near-consensus within the ECB: barring a dramatic fall in inflation data, a June rate hike is almost a certainty. Economists are currently widely betting on two to three rate actions in 2026, potentially in June, September, or even by year-end. Bank of Greece Governor Yannis Stournaras stated frankly that "preserving the ECB's credibility is a strong argument for a rate hike next month"—if the central bank fails to act in the face of persistent inflation, consumers will eventually question whether its "preparedness to act" pledge is merely empty talk.

Euro Finds Short-Term Support, but U.S.-Iran Deal Uncertainty Remains In summary, the EUR/USD pair is currently supported by optimism surrounding the U.S.-Iran deal, with improved risk appetite pushing the dollar lower. However, Trump's subsequent "in no rush" comment indicates the deal remains uncertain. Concurrently, falling oil prices have weakened expectations for Fed rate hikes, while hawkish comments from ECB officials provide additional support for the euro. In the near term, the direction of EUR/USD will depend on substantive progress in U.S.-Iran negotiations and shifts in market expectations regarding the two major central banks' policies.

EUR/USD Daily Technical Analysis From a daily chart perspective, EUR/USD is currently trading around 1.1640, in a consolidation phase following a recent rebound from lows. Several technical indicators show neutral-to-weak signals. Regarding the moving average system, the current price is above the short-term MA5 (1.1616), with the MA10 (1.1647) slightly above the current price. The MA20 (1.1686), MA50 (1.1656), MA100 (1.1698), and MA200 (1.1680) are all positioned above the current price, forming short-term resistance. This "price below all major moving averages" configuration indicates that EUR/USD faces clear short-term pressure and is in a weak consolidation pattern. It is worth noting that since retreating from above 1.1800 in early May, the price has failed to effectively reclaim the MA20, suggesting insufficient rebound momentum. As of 14:54 Beijing time, EUR/USD is quoted at 1.1643/44.