Euro Retreats Toward 1.1650 Amid Fed Policy Shift and Geopolitical Tensions

The EURUSD pair has retreated to two-week lows near 1.1650, driven by a hawkish pivot from a divided Federal Reserve and a flight to the safe-haven US Dollar amid ongoing Middle East tensions. Despite holding rates steady at 3.50%-3.75%, the Fed signaled a shift away from its "easing bias" as policymakers react to rising energy prices, causing markets to price out 2026 rate cuts and boosting Treasury yields. Adding to the volatility is the unusual leadership transition at the Fed, where outgoing Chair Jerome Powell will remain as a Governor to potentially counter political pressure for lower rates. Investor focus now shifts to the Eurozone’s upcoming GDP and inflation data, alongside the ECB’s interest rate decision, where a pause is expected while the door remains open for potential hikes this summer.

The FTSE Mib is down 1.0% at 47,336.24, the Mid-Cap has lost 1.1% to 57,335.57, the Small-Cap is down 0.1% at 34,399.36, while Italy Growth is flat at 8,826.18.

London's FTSE 100 is up 0.2%, Paris's CAC 40 has shed 1.2%, and Frankfurt's DAX 40 is down 0.4%.