Dollar Weakens after Iran-Israel Ceasefire; Euro Hits Highest Level

The US dollar slipped during trading on Tuesday, June 24, while the euro climbed to its highest level since October 2021. 

This movement followed the announcement of a ceasefire between Iran and Israel, alongside Federal Reserve Chair Jerome Powell’s recent remarks forecasting a rise in US inflation this summer.

The ceasefire began to hold under strong pressure from US President Donald Trump, sparking cautious optimism about ending the largest military confrontation ever recorded between Israel and Iran.

Market Reaction and Currency Movements

Adam Button, Chief Currency Analyst at ForexLive in Toronto, commented: “The market is currently pulling back from its earlier bets on Middle East tensions.”

The euro and the Japanese yen both appreciated amid falling oil prices. This reflects the energy import dependence of the European Union and Japan on oil and liquefied natural gas, in contrast to the US, which is a net exporter of these commodities.

The euro gained 0.28%, closing at $1.161 after peaking at $1.1641 earlier in the session.

The dollar fell 0.86% against the Japanese yen, to 144.89 yen.

The Australian dollar, sensitive to risk sentiment, rose 0.46% against the US dollar to $0.6486.

The British pound climbed 0.77% to $1.3626, touching earlier highs not seen since January 2022.

Egyptian Pound Rates:

Euro 57.8400 58.0075 

Powell’s Inflation Outlook and Fed Policy

Despite the dollar’s decline, Federal Reserve Chair Jerome Powell’s testimony before Congress underscored expectations for rising inflation in the US over the near term. Powell emphasized that the Fed is in no hurry to cut interest rates, even as some other Fed officials signal support for rate reductions soon.

This mixed messaging left traders searching for clear guidance: Powell noted a strong labor market without signs of weakening, contrasting with Fed policymakers Christopher Waller and Michelle Bowman, who observed early softening.

Adam Button noted:

“The market anticipated a strong signal on imminent rate cuts, but Powell remains cautious.”

Rate Cut Speculation

Vice Chair Michelle Bowman suggested rate cuts may be approaching, while Christopher Waller urged consideration of cuts at the Fed’s next meeting. President Trump also advocated for reducing rates by 2 to 3 percentage points.

Futures markets have increased their expectations for rate cuts this year to 60 basis points from 46 basis points before Waller’s remarks. This implies two cuts of 25 basis points are considered likely, with a rising chance of a third cut.

However, a rate cut is unlikely at the upcoming Fed meeting on July 29-30, with markets eyeing the first cuts in September or October.

Dollar Outlook 

Vasily Serebryakov, FX strategist at UBS New York, said: “If the US economy deteriorates faster and the Fed cuts rates more aggressively than expected, the dollar could weaken significantly.”

However, he added: “If rate cuts are delayed until September and limited to two this year, the dollar may weaken moderately but not drastically.”

US Consumer Confidence Deteriorates

Adding to market caution, June data revealed an unexpected decline in US consumer confidence, with families expressing heightened concern over job conditions and employment prospects over the next six months.