EUR/USD holds near 1.14 as traders brace for 3 central bank decisions

The euro is hovering near three-week lows as traders await three central bank decisions that will shape the dollar's trajectory this quarter.

The euro held near $1.14 on Monday, within striking distance of its July lows, as a temporary halt in U.S.-Iran hostilities eased oil-driven inflation fears and shifted focus to this week's Federal Reserve, European Central Bank and Bank of England meetings.

"The dollar's retreat reflects a recalibration of geopolitical risk premiums rather than a fundamental shift in rate expectations," said James Okafor, macro strategist at Edgen. "The Fed's dot plot and forward guidance will determine whether EUR/USD breaks below 1.1350 or stages a relief rally."

The dollar index slipped 0.3% to 101.20, pulling back from its 2026 high of 101.80 as oil prices tumbled more than 6% after the U.S. paused its bombing campaign in Iran over the weekend. Brent crude fell to $90.58 a barrel, while spot gold climbed 0.9% to $4,087.79 an ounce. Asian equities rallied, with Japan's Nikkei 225 rising 0.7% and the Shanghai Composite adding 1.2%.

The Fed's two-day meeting beginning Tuesday is the marquee event. Overnight index swaps price a 76% probability of a hold at 5.25% to 5.50%, according to the CME FedWatch Tool, with the first fully priced cut not expected until the fourth quarter. A hawkish hold — one that keeps September tightening on the table — could push EUR/USD through support at $1.1358, the lower Bollinger Band, while a dovish tilt would open a path toward $1.1480.

Three Central Banks, One Week

The Bank of England and the Bank of Japan also announce policy decisions this week, creating a synchronized test of global rate expectations. The BoE is widely expected to hold at 5.0%, though policymakers remain alert to the risk that renewed Middle East tensions and higher energy prices could reignite inflationary pressures. The BoJ's decision poses the bigger risk for the yen, with traders on alert for potential currency intervention if USD/JPY pushes above 164.

Japan's Corporate Services Price Index rose 3.2% in June from a year earlier, down from 3.4% previously, while Chinese industrial profits grew 18.7% year-to-date through June, easing from 18.8%. The data points to moderating but still-elevated inflation pressures across Asia's two largest economies.

Rate Differentials and the Dollar's Ceiling

The dollar's 2026 rally — the DXY is up 2.9% year-to-date — has been driven by the resilience of the U.S. economy relative to peers. But the geopolitical backdrop is shifting. The U.S.-Iran pause, if sustained, removes a key source of safe-haven demand for the greenback and reduces the inflation premium embedded in oil prices.

For EUR/USD, the immediate technical picture is bearish. The pair is trading below its 20-day moving average at $1.1417, with the relative strength index hovering near 43, in neutral-to-bearish territory. A break below $1.1358 would target the July 17 low of $1.1310, while a catalyst from a dovish Fed could drive a recovery toward $1.1480.

The last time the Fed held rates with similar market-implied probabilities — in September 2024 — the dollar weakened 1.8% over the following two weeks as Chair Jerome Powell emphasized data dependence. A repeat of that language this week would give euro bulls a reason to add to long positions.

This article is for informational purposes only and does not constitute investment advice.