EUR/USD Under Pressure as Dollar Strengthens Amid Middle East Risks
EUR/USD weakened slightly to around 1.1655 in early Asian trading on Thursday, as the euro was pressured by a stronger US dollar amid uncertainty over a two-week ceasefire between the US and Iran.
According to a Reuters report, sporadic fighting continues in the Middle East, including in Lebanon. Iranian officials have deemed the situation a violation of the terms of the less-than-day-old ceasefire and called resuming peace talks "nonsense" as Israel escalates its attacks. This situation has maintained demand for safe-haven assets like the US dollar.
Market attention will next turn to the release of US March inflation (CPI) on Friday. The headline CPI is expected to rise 3.3% (YoY) from 2.4% previously, boosted by the war-related surge in oil prices. If US inflation accelerates again, the dollar could strengthen, adding pressure on EUR/USD in the short term.
From Europe, the ECB's hawkish tone is seen as a potential catalyst for curbing the euro's decline. Several policymakers, including Pierre Wunsch and Dimitar Radev, have called a rate hike at the April meeting a real possibility, although many officials view June as more likely. Markets are now pricing in two rate hikes and a more than 50% chance of a third hike in December, a sharp change from the pre-war outlook when the risk was a rate cut this year.
5 Key Points:
- EUR/USD fell slightly to around 1.1655 in early Asian trading on Thursday.
- Middle East tensions and concerns about ceasefire violations have boosted the US dollar as a safe haven.
- Iranian officials consider resuming peace talks "nonsensical" amid the escalation in Lebanon.
- Market focus on US March CPI; projected at 3.3% YoY vs. 2.4% previously.
- ECB more hawkish; markets now hit. (asd)
Source: Newsmaker.id
