EUR/USD rallied to its highest level since October 2021, above the 1.1650 level on Wednesday, driven by a risk-on mood sparked by the de-escalation of the Iran-Israel conflict and broad weakness in the US Dollar. Investors' growing speculation that the Federal Reserve (Fed) will cut interest rates pushed the Greenback lower, setting it to test yearly lows. At the time of writing, the pair trades at 1.1661, up 0.45%.

Geopolitics and central bank speeches are grabbing the headlines at the beginning of the week. Fed Chair Jerome Powell appeared before the US Senate, reiterating that monetary policy is appropriate and that the central bank is struggling to determine the impact of tariffs on inflation. Powell said, "The question is, who's going to pay for the tariffs?." "How much of it does show up in inflation. And honestly, it's very hard to predict that in advance," he added.

Regarding geopolitics in the Middle East, US President Donald Trump revealed that the US would hold a meeting with Iran next week. He warned that if Iran's regime begins to build nuclear weapons, the US would attack Iran again.

In the meantime, the US economic schedule featured housing data, which was worse than expected, alongside another raft of Fed speakers. Across the pond, Consumer Confidence in France was steady, failing to improve as expected. In Spain, the Gross Domestic Product (GDP) for the first quarter was in line with estimates.

Ahead of the economic docket in the Eurozone, the agenda will feature the GfK Consumer Confidence for July and speeches by European Central Bank (ECB) officials, Luis de Guindos and Isabel Schnabel. In the US, the schedule will unveil the final release of growth figures for Q1 2025. Durable Goods Orders, as well as speeches by Cleveland Fed's Beth Hammack, Governor Michael Barr, and Minneapolis Fed's Neel Kashkari, are awaited by investors.

Source: Fxstreet