Credit Agricole CIB Research discusses EUR/USD outlook amid the latest developments in the Middle East.

"The US-Iran truce announcement sent EUR/USD back above 1.17 for the first time in a month yesterday. That looked primarily like a reversal of the losses initially caused by the outbreak of the conflict in the Middle East, as the sharp correction in energy prices has narrowed the relative terms-of-trade shock between the Eurozone and the US. The pair paid little attention to the widening in short rate differentials, as on the day the 2Y ESTR-SOFR spread turned more negative to the tune of 20bp," CACIB notes.

"While fixed income markets may need a bit more time to adjust to that new reality on the global stage, these latest developments do not call for the EUR/USD rebound to get much more traction in the near term, even though some might be tempted to close the gap with February’s close of around 1.18," CACIB adds.