Euro Weakens, US Dollar Resumes Demand Amid Iran Risks
The euro weakened to around 1.1425 against the US dollar in European trading on Thursday (July 9). Pressure arose after the US dollar pared most of its initial losses, supported by increased demand for safe-haven assets amid renewed geopolitical risks.
The US Dollar Index (DXY), which measures the greenback's strength against six major currencies, weakened slightly to around 101.00. However, the index managed to rebound from a daily low of 100.80, indicating that demand for the dollar remains quite strong.
Safe-haven sentiment increased after the United States and Iran renewed attacks on each other. Tensions escalated after President Donald Trump confirmed that a memorandum of understanding (MoU) with Iran had expired.
The US military also reportedly attacked Iranian infrastructure, leading markets to believe the tensions could persist for longer. This situation has again raised concerns about stability in the Middle East, especially as the conflict affects the vital energy routes around the Strait of Hormuz.
Rising oil prices due to reduced traffic near the Strait of Hormuz have again raised inflation expectations. This situation could make Federal Reserve officials even more cautious about cutting interest rates this year. The minutes of the June FOMC meeting also showed that policymakers still view inflation as a major risk, and some officials believe further tightening may still be necessary.
On the other hand, the market has also begun to raise hawkish expectations for the European Central Bank after oil prices surged due to worsening US-Iran relations. According to a Reuters report, traders now expect an additional 30 basis points of interest rate hikes this year. In June, the ECB raised its key interest rate by 25 basis points. (yds)
Source: Newsmaker.id
