Hormuz Developments Key for EUR/USD & GBP/USD Direction

If the Strait of Hormuz opens normally, oil prices may fall, and the US dollar could weaken slightly. This may help EURUSD and GBPUSD move higher and correct some recent losses.

For the euro, there is also some support from improving fiscal conditions. France reduced its budget deficit from 5.8% in 2024 to 5.1% in 2025, which is a positive signal for the Eurozone economy. This adds to the chance of a short-term recovery in EURUSD if geopolitical risks ease.

However, EUR/USD is trading near 1.15200, and recent weekly candles show long upper wicks, which suggest increasing selling pressure at higher levels. The pair is also trading below the 50-week moving average, a key long-term signal of weakness. A strong close below 1.14000 could confirm the start of a broader downtrend.

EUR/USD Weekly Chart

For the pound, UK retail sales fell to -0.4%, but the drop was smaller than expected, which is slightly positive for GBP. However, the overall UK outlook remains sensitive to higher oil prices and weak consumer confidence, so gains may be limited if the conflict continues.

GBP/USD has already given back most of its gains from earlier this week and is now trading near 1.33000, with the next support level around 1.33500. If tensions in the Middle East do not ease and oil prices remain high, the pair could face further pressure and move into a broader downtrend.

GBP/USD Daily Chart

At the same time, the US dollar still has mixed support because higher oil prices keep inflation risks elevated and reduce expectations of rate cuts.

In short

• If Hormuz tensions ease, EURUSD and GBPUSD may rise and correct recent losses

• France’s lower deficit supports the euro outlook

• Better-than-expected UK retail sales support the pound slightly

• But higher oil prices still support the dollar, so upside in both pairs may be gradual, not strong.