Middle East Optimism has led to the dollar falling, the highest euro since 2021

By Karen Brecktel

NEW YORK (Reuters) – The euro has fallen on Tuesday since October 2021, with the euro rising to its highest level after an announcement of a ceasefire between Iran and Israel.

The ceasefire began to take hold on Tuesday under pressure from US President Donald Trump.

“The markets are currently unleashing trade in the Middle East,” said Adam Button, chief currency analyst at Forexlive in Toronto.

As oil prices fell, the euro and yen were obtained. The European Union and Japan rely heavily on imports of oil and liquefied natural gas, while the US is a net exporter.

The single currency has increased 0.38% at $1.162 after reaching $1.1641 previously. The dollar fell 1% to 144.68 yen.

Risk-sensitive assets, including the Australian dollar, were also obtained through improved risk sentiment. The Australians were up 0.68% against the greenback, compared to $0.6503.

Sterling rose 0.77% to $1.3626, reaching its highest level since January 2022.

The US currency said he and many people at the Fed expected inflation to rise soon, even after the US currency said in testimony before the US Congress, and that the central bank had expected it to be in a hurry to ease borrowing costs during that time.

Traders have adapted particularly to his remarks after two other Fed policymakers showed they support short-term interest rate cuts, citing concerns about the labour market and lower expectations for a revival of inflation.

“The market has been looking for a strong pushback on potential interest rate cuts, but Powell continues to sit on the fence,” Button said.

“The big debate with the Fed is currently in the job market. Waller and Bowman said they see signs of softness, while Powell doesn’t see weakness in the labor market,” Button said.

Michelle Bowman’s vice-chairman for oversight said on Friday that federal Gov. Christopher Waller should consider cutting interest rates at his next meeting, and that time appears to be imminent.

US President Donald Trump said Tuesday that the country’s interest rates should be reduced at least two to three points.

The Fed fund futures trader is priced at a 60 basis points this year, from around 46 basis points before Waller’s comment on Friday. This is hoping that the two 25 reference points for the cut are certain, increasing the chances of a third reduction.