Euro Held Back, Markets Wary of Geopolitical and Energy Risks
EUR/USD traded cautiously during Thursday's European session, hovering around the 1.1550 area after weakening in the previous session. This limited movement reflects investors' continued caution amid rising geopolitical uncertainty in the Middle East, particularly after conflicting signals regarding the likelihood of a de-escalation in the Iran conflict once again clouded the market.
In terms of sentiment, the US dollar remains supported as a safe haven asset as global markets move defensively. Reuters reported that uncertainty over the Iran conflict, risks in the Strait of Hormuz, and surging oil prices have pressured riskier assets while supporting the dollar, while bond prices have also been under pressure as markets adjust interest rate expectations. Under these conditions, the euro finds it difficult to strengthen further as appetite for riskier assets has not fully recovered.
On the other hand, pressure on the euro also comes from worsening economic sentiment in the eurozone. Consumers in Germany, France, and Italy are reportedly increasingly pessimistic as the Iran war pushes up the cost of living and raises inflation concerns. At the same time, the ECB warned that this conflict could trigger systemic stress in financial markets and increase uncertainty about growth and inflation, thus weighing down the euro's prospects.
In the short term, the market will be watching to see whether Middle East uncertainty begins to ease or worsen, as this will significantly determine the direction of the dollar and the euro. Furthermore, movements in oil prices, bond yields, and central bank comments will also be important factors. As long as risk-off sentiment remains dominant and the market lacks diplomatic clarity, EUR/USD is likely to remain within a limited range with a cautious trend.
Causes:
1. Uncertainty over the Middle East conflict is holding back investors from buying the euro.
2. The US dollar is still sought after as a safe haven asset while global markets are tending defensively.
3. Concerns about inflation and an economic slowdown in the eurozone are also holding back the euro's strength.
Things to watch:
1. The latest developments in the Iran conflict and the potential for de-escalation.
2. The direction of oil prices and bond yields, as both influence demand for the dollar.
3. The tone of the ECB's comments and eurozone economic data will determine the euro's resilience amid external pressures. (CP)
Source: Newsmaker.id
