Euro Consolidates Near Late-May Highs as Hawkish Fed and Iran Risks Underpin Dollar

EUR/USD is trading around 1.16742, in a bullish consolidation phase below highs last seen in late May. The pair touched its highest level since late May during Thursday's Asian session, with bulls awaiting a decisive break above the 1.1700 level before establishing new positions to extend the uptrend that has persisted for over three weeks.

**Dollar Support Factors: Hawkish Fed Stance and Geopolitical Risks**

The dollar's recent relative strength is primarily underpinned by two factors. First, the Federal Reserve's hawkish policy stance continues to resonate, with market expectations of further policy tightening providing a floor for the dollar. Second, safe-haven demand driven by Iran tensions has attracted bids for the dollar as a safe-haven asset. According to ING FX strategist Pesole, equity market unease has lent some support to the dollar, reaffirming its robust safe-haven appeal.

**Euro Not Broadly Weak on Its Own**

Cross-rate performance shows the euro has not exhibited notable weakness against currencies such as the pound and the Swiss franc, indicating the euro itself is not broadly weak, with primary pressure stemming from the dollar's relative strength. On the technical front, the focus is on whether the 1.1700 level is breached, which could extend the uptrend further; key support below sits around the 1.1400 area. Market reports indicate that French political risk factors have had limited impact on the euro, with a muted market reaction.

**Key Points Ahead**

In the near term, the direction of EUR/USD will hinge on whether dollar strength persists, along with upcoming inflation data and Fed officials' remarks. ING expects the Fed's June meeting minutes to further cement the hawkish stance, but with weaker employment data, the dollar index may remain range-bound in the short term, with upside risks pointing toward 101.50 to 102.0.