EUR/USD outlook: FOREX Friday | April 24, 2026

Earlier today, we saw some headlines that Pakistan may announce later that talks between Iran and the US will resume. Apparently, Iran’s finance minister Abbas Araghchi is set to visit to Pakistan. But this doesn’t mean talks will start with the US. So, I would be careful reading too much into this, but markets have reacted and we saw European indices bounce back while crude oil dropped a good $4 from its earlier highs in immediate reaction. The EUR/USD also rebounded to climb back above the 1.17 handle. But if those reports are dismissed or we see oil prices resuming their climb again regardless, investors will probably think twice about increasing risk exposure ahead of the weekend, even as some lingering optimism persist that a positive shift in the narrative could emerge in the coming days. A prolonged stalemate would point towards sustained upward pressure on energy prices, amplifying stagflation risks for Eurozone. Simply put, the higher oil climbs, the more it weighs on European assets and the EUR/USD outlook.

 

Will there be a breakthrough in US-Iran stalemate?

 

After the initial talks which broke down, another round of high stake peace talks between officials from Iran and the US were set to take place in Islamabad earlier this week, but this never happened. The two-week ceasefire was extended indefinitely by Trump, but Iran wanted the naval blockade removed before talks can resume. Will we see those talks resume and any meaningful breakthrough in the coming days? If so, this could see the EUR/USD climb back towards 1.2000 handle, with 1.1800 being the initial upside objective.

 

But the situation remains far from resolved. Just a week ago, both Iran and Trump were insisting the Strait of Hormuz was to be re-opened for business and markets surged higher in anticipation. Fast forward to today, and with the US Navy enforcing a blockade, it’s effectively still shut. The longer that remains the case, the greater the shock to oil markets — and the less likely we are to see a meaningful drop in oil prices.

 

There are already signs of higher energy costs feeding through to pricing. But the bigger concern is a stagflationary backdrop, where central banks may have little choice but to tighten into slowing growth. That’s hardly supportive for risk sentiment, and by extension, tends to favour the dollar.

 

In the near term, uncertainty around developments in the Gulf suggests investors will be reluctant to head into the weekend underweight dollars.

 

With the Federal Reserve in blackout mode and little in the way of official commentary, rates markets are suggesting expectations towards a slightly more hawkish FOMC meeting next week are increasing. But that could all change if there are any positive developments in the US-Iran talks.

 

EUR/USD outlook: Euro struggling for momentum

 

The euro continues to feel somewhat heavy. Rising oil prices and mounting evidence that firms are passing on higher input costs are weighing on European assets. This morning we had the closely watched Ifo index, Germany’s most prominent leading indicator, which took another plunge in April. It fell to 84.4, from 86.3 in March, marking the lowest level since the pandemic. The Middle East war is continuing to hit sentiment as the energy price shock weighs on growth. With the prolonged closure of the Strait of Hormuz, this is also turning into a broader supply chain shock, which is bad news for the German economy sensitive to global disruptions.

 

With stagflation risks roaming, markets are not sure what this all means for policy response from the ECB. The likelihood of a June rate hike is currently around 65-70%, but this sort of tightening is hardly any good news for the currency. If was rising rate hike expectations because of solid growth, then it would have been a different story. So, a hawkish repricing in this case may not support the currency.

 

 

Barring a surprise end to the stalemate in the coming days, the EUR/USD looks to be edging towards the 1.1600 area again, should the pair fail to hold above the 200-day average and support that it was testing around 1.1665 - 1.1680 area at the time of writing.

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R