Euro weakens below 1.1400 as Fed hike bets lift US Dollar
The EUR/USD pair trades on a negative note near 1.1380 during the early Asian trading hours on Wednesday. The major pair extends the decline as traders continue to assess the developments surrounding the US-Iran peace deal.
US President Donald Trump said on Tuesday that Iran had "fully and completely" agreed to allow nuclear inspections, but Iran’s Foreign Minister Abbas Araghchi said earlier that real negotiations on the "nuclear issue" haven't started yet. Iran's chief negotiator stated on Tuesday that the Strait of Hormuz will "never return to its pre-war conditions" and that Iran will maintain control of the vital waterway.
A fresh round of talks between Israel and Lebanon began in Washington, DC, on Tuesday, in an effort to end fighting in Lebanon between Iran-backed Hezbollah and Israel. Any signs of a prolonged conflict in the Middle East or a lack of progress in the US-Iran peace agreement could weigh on the riskier assets, such as the Euro (EUR) against the US Dollar (USD) in the near term.
An unexpectedly hawkish Fed meeting chaired by Kevin Warsh last week boosted expectations for a year-end interest rate hike, supporting the Greenback. Traders are now pricing in nearly a 37.4% chance of at least 25 basis points (bps) at its July meeting, up from 8.5% a week ago, according to the CME FedWatch tool.
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