Dollar Rallies as Iran Conflict Fuels Safe-Haven Demand

EUR/USD tests 1.1400 support after breaking key trend line.

As the war in Iran rages on, with no immediate end in sight, the dollar has become the preferred safe-haven currency of investors. The US Dollar Index (DXY), which measures the dollar’s performance against a basket of 6 major peers, ended last week at 100.49, which is the highest it’s been since November, 2025.

Against the euro, the dollar ended the week at 1.1414, a level last reached in July, 2025. The dollar advances were achieved despite disappointing U.S. GDP, which came in at 0.7%, about half the forecast and the previous reading.

Inflation data released throughout last week met analysts’ expectations, with consumer spending increasing slightly (monthly CPI: 0.3%; previous: 0.2%). Lingering inflation, combined with the Middle East conflict and disruptions in oil supplies, has pushed the probability of a rate cut further down the line. According to the CME FedWatch tool, the chances for a June cut are now just 22.6%, with the first potential cut coming in September.

Economic Calendar Highlights

There are three interest rate announcements this week, but none of them are expected to change, so the impact may already be priced in. The Federal Reserve will announce the rate on Wednesday at 6:00 pm GMT, alongside the FOMC Economic Projections. The rate announcement will be followed by the usual press conference, scheduled at 6:30 pm GMT. This will likely create more volatility than the rate itself, especially if Fed Chair Powell offers clues regarding the next rate cut.

The Bank of England (BoE) will announce the interest rate on Thursday at 12:00 pm GMT. The current rate is 3.75%, and no change is expected. Later in the day, at 1:15 pm GMT, the European Central Bank (ECB) will announce the interest rate, with no change expected either (currently, 2.15%). However, ECB President Lagarde will hold a press conference half an hour later, which may create volatility.

Technical Outlook – EUR/USD

After breaking 1.1600 and the bullish trend line, the pair dropped swiftly and finished last week right on the support level at 1.1400. This level was last reached in July, 2025, and although the RSI has entered oversold territory, momentum is strong, so the dollar’s advance is likely to extend further.

The next support is located at 1.1200, which was 2024’s high (resistance) and then acted as support in May of 2025, although it was briefly breached to the downside. The oversold condition shown by the RSI will likely make way for some sort of relief rally, but the overall bias is bearish, with the 1.1200 zone as the target. Keep in mind that any changes on the geopolitical scene can heavily affect the dollar and consequently the EUR/USD pair.