Ceasefire sinks dollar

The euro-dollar currency pair extended its gains for the fourth straight day on Tuesday, up by 0.39%, even though EURUSD trades off the yearly highs of 1.1641, driven by US dollar weakness spurred by a de-escalation of the Middle East conflict.

Israel and Iran agreed to a ceasefire, which improved the market mood and ultimately weighed on the greenback with the pair trading at 1.1619, up 0.38%.

Market mood turned upbeat, pushing the dollar down. The DXY Dollar Index, which tracks the buck’s performance against a basket of six currencies, including the euro, tumbled over 0.47%, trading near weekly lows of 97.70.

Recently, the New York Times revealed that US intelligence suggests that strikes on Iran did not destroy nuclear sites, which CNN previously reported. Despite this, Wall Street ended Tuesday’s session in the green with traders brushing aside hawkish comments by Federal Reserve Chairman Jerome Powell.

In his testimony before the US House of Representatives, Powell stated that rates are modestly restrictive. He added that if inflation pressures are contained, the Federal Open Market Committee (FOMC) may consider cutting rates.

During the European session, the Eurozone economic docket revealed that the ifo Business Climate rose for the sixth consecutive month, despite overall geopolitical uncertainty. Aside from this, some European Central Bank speakers crossed the wires.

ECB Francois Villeroy said that the central bank could still cut rates if inflation expectations remain moderate, according to the FT. ECB’s Kazimir shifted his stance, turning neutral, favouring keeping rates unchanged. He said that he thinks “we are at target when it comes to neutral rate.”