EUR/USD ahead of the new week: Expecting high volatility

The EUR/USD pair is starting Monday’s trading session near 1.1468.

This week, global financial markets will closely monitor two pivotal drivers: the prospects of a US-Iran nuclear deal and the upcoming Federal Reserve meeting. Any signs of progress in the negotiations could strip the geopolitical premium out of oil prices, subsequently weakening safe-haven demand for the US Dollar.

Concurrently, the market is bracing for the first Fed meeting chaired by Kevin Warsh, which is expected to set the tone for interest rate expectations heading into the second half of the year.

This meeting is critical for EURUSD. Just last week, robust US inflation and labor market data bolstered the Greenback, reinforcing expectations that the Fed will maintain its hawkish stance. Meanwhile, investors will continue to digest the impact of the ECB’s recent rate hike, looking for further guidance from European policymakers.

Additional direction will come from US macroeconomic releases, including retail sales and industrial production, which will provide further clarity on the health of the US economy and the trajectory of its monetary policy.