The March Producer Price Index (PPI) released in the U.S. did not favor the dollar. All components of the release fell into the "red zone," undershooting forecast values. And although the overall PPI did indeed accelerate (and quite significantly), traders essentially ignored this fact. Moreover, the details of the published report allowed EUR/USD buyers to test the 18-figure mark for the first time since late February.

Of course, Tuesday's growth in the pair was driven by geopolitics, specifically the market's interpretation of recent geopolitical events. However, the PPI report also contributed to the strengthening upward trend.

According to the data released, the overall PPI on a monthly basis remained at 0.5% in March, contrary to forecasts expecting a rise to 1.2%. This figure has stayed at this level for the third consecutive month. Year over year, the overall PPI accelerated to 4.0%, its highest level since spring 2023. However, it also fell into the "red zone," as most analysts had predicted a more substantial increase—to 4.4%.

The core PPI surprised traders the most. Contrary to expectations for a month-on-month increase to 0.4%, this indicator unexpectedly slowed down to 0.1%, reaching its lowest level since November of last year. A downward trend has been recorded here for the second consecutive month. Year-over-year, the core PPI remained at the previous month's level of 3.8%, instead of rising to 4.2% as forecasted.

Again, all components of the report fell into the "red zone"—even the overall PPI, which was expected to demonstrate a more pronounced rise amid the Middle Eastern conflict and the energy crisis.

Alarming signals for the dollar are also hidden in the report's structure. For example, the services segment in the PPI exhibited zero dynamics. This is a critical point, as inflation in the services sector tends to be more resilient and is considered a more fundamental component of price dynamics. A zero result indicates a slowdown in domestic demand, and, consequently, a decreased ability of companies to pass on costs to the end consumer. All of this suggests a gradual weakening of inflationary pressure in the medium term.

Based on market reaction, traders had priced in a more aggressive rate of inflation; however, the actual figures were significantly lower than expectations—for example, the overall PPI month-on-month was more than twice below the forecast level.

The weak dynamics of the core index signal a lack of broad inflationary pressure in the manufacturing sector: price increases remain localized in energy and are not (for now) "translating" into sustained inflation for goods and services.

Nevertheless, it must be acknowledged that Tuesday's PPI report provided only background support for EUR/USD buyers. The primary driver of growth remains geopolitics.

On one hand, Donald Trump took a step toward further escalation of the Middle Eastern conflict on Monday. The United States formally began a blockade of the Strait of Hormuz, specifically targeting Iranian ports, as the blockade applies only to ships heading to or from Iran. On the other hand, there have been no reports of any arrests or, importantly, retaliatory actions from Iran over the past 24 hours. Thus, despite the formal blockade of the strait, hostilities have not resumed, and the ceasefire remains in effect.

Additionally, many global media outlets are reporting that Iran and the U.S. are communicating through intermediaries and are ready to resume negotiations in Islamabad later this week, approximately on April 16. Specifically, Fox News, citing a high-ranking Trump administration official, reported "serious signs of nearing an agreement."

Furthermore, support for EUR/USD buyers also came from U.S. Vice President JD Vance, who made a resonant statement on Tuesday that the United States "has achieved its goals in Iran and can begin to scale down military operations." He also suggested resuming the negotiation process, stating that "now the ball is in Tehran's court."

Such fundamental signals strengthen expectations for a gradual de-escalation of the conflict in the Middle East. Against this backdrop, there has been an increased interest in risk assets (including the euro) in the market, while demand for the safe-haven dollar has simultaneously decreased. The PPI report published on Tuesday merely complemented the fundamental picture.

The EUR/USD pair maintains potential for further growth. On the daily chart, buyers tested the 1.1800 resistance level (the upper boundary of the Kumo cloud on D1) and attempted to consolidate in the 18-figure area. It is advisable to use downward corrective pullbacks as a reason to open long positions, targeting 1.1800 and, in the future, 1.1850.