EUR/USD Edges Lower Below 1.1700 As Iran-UAE Conflict Boosts US Dollar

The EUR/USD pair trades in the negative territory around 1.1690 during the early Asian session on Tuesday. The Euro (EUR) weakens against the US Dollar (USD) amid rising tensions in the Middle East after Iran attacked the United Arab Emirates (UAE). Traders will keep an eye on the US April ISM Services Purchasing Managers Index (PMI) report, which is due later on Tuesday. 

CNBC reported on Monday that the UAE came under attack from Iranian drones and missiles, while the US said it sank Iranian boats in the Strait of Hormuz. US President Donald Trump warned Iran that it will be “blown off the face of the earth” if it targets US ships that are protecting commercial vessels transiting the strait. Fears of an exacerbated or prolonged war could boost a safe-haven currency such as the Greenback and create a headwind for the major pair. 

Across the pond, hawkish remarks from the European Central Bank (ECB) policymakers might help limit the shared currency’s losses. Bundesbank President Joachim Nagel said on Monday that the ECB may need to raise interest rates in June if the inflation outlook does not improve significantly in the coming weeks. 

The ECB kept rates ‌unchanged last week. According to the statement, the central bank said the inflation outlook was largely unchanged, adding that "the upside risks to inflation and the downside risks to growth have intensified.”