Euro consolidates below mid-1.1400s as Hormuz risks support safe-haven USD

The EUR/USD pair kicks off the new week on a subdued note and oscillates in a narrow band below mid-1.1400s during the Asian session. Spot prices, however, remain within striking distance of a nearly two-week high, touched last Thursday, amid mixed fundamental cues.

Despite a fragile US-Iran interim agreement, tensions surrounding the Strait of Hormuz remain elevated as Iran seeks to tighten control over the strategic waterway. This keeps the geopolitical risk premium in play and offers some support to the safe-haven US Dollar (USD), which, in turn, is seen acting as a headwind for the EUR/USD pair.

The USD bulls, however, seem hesitant amid reduced bets for interest rate hikes by the US Federal Reserve (Fed) following the release of rather unimpressive US jobs data last week. In fact, the closely-watched US Nonfarm Payrolls (NFP) report showed that the economy added only 57K new jobs in June, compared to the 110K expected.

Adding to this, the previous month's reading was revised down from 172K to 129K, while the Unemployment Rate edged lower to 4.2% in June. This comes on top of easing inflation fears in the face of the recent slump in Crude Oil prices and shifted market expectations from one to two Fed rate increases in 2026 to between zero and one hike.

This, along with a generally positive tone around the equity markets, keeps a lid on any meaningful appreciation for the USD and should limit the downside for the EUR/USD pair. Meanwhile, softer Eurozone inflation data forced investors to reduce bets on further European Central Bank (ECB) rate hikes, warranting caution for aggressive bulls.

Monday's economic docket features German Factory Orders, Eurozone Sentix Investor Confidence, the monthly Producer Price Index (PPI), and Retail Sales. Later during the early North American session, the release of the US ISM Services PMI, along with speeches from influential FOMC members, could provide some impetus to the EUR/USD pair.