The Euro remains supported above the 1.1400 level as expectations of a hawkish ECB offset concerns over escalating US-Iran tensions.

EUR/USD edges higher to around 1.1405 during Wednesday’s Asian trading session. Elevated energy prices are raising concerns about renewed inflationary pressures, reinforcing expectations that the European Central Bank may maintain a tighter policy stance. Meanwhile, geopolitical tensions remain in focus after President Donald Trump downplayed the chances of near-term negotiations with Iran, as US military operations against the country entered an eleventh consecutive night.

EUR/USD posts modest gains near 1.1405 during Wednesday’s early Asian trading hours, supported by the European Central Bank’s increasingly hawkish outlook. The Euro finds demand against the US Dollar as investors position ahead of the ECB’s policy announcement scheduled for Thursday.

European sovereign bonds advanced earlier this week as persistent geopolitical risks in energy markets and concerns over renewed inflation pressures led traders to anticipate a less accommodative ECB policy trajectory.

Although the ECB is broadly expected to keep its deposit rate unchanged at 2.25% at the July meeting, market pricing suggests rates could climb to 2.66% by December and 2.73% by February 2027. According to Reuters, investors have also fully priced in a rate hike for September.

On the geopolitical front, US President Donald Trump downplayed the likelihood of near-term talks with Iran as hostilities continued and Yemen’s Iran-backed Houthi forces renewed threats against shipping in the Red Sea. Trump warned on Tuesday that Washington would retaliate if maritime routes were disrupted, though he provided no details on the potential response.

Meanwhile, Iran’s senior military leadership stated that Tehran would broaden its military operations and target US and allied interests throughout the region should Washington strike Iranian nuclear facilities, according to Xinhua. The escalating Middle East conflict could strengthen demand for traditional safe-haven assets, including the US Dollar, potentially limiting further upside in EUR/USD.