EUR soars amid new safe-haven status against USD
The common currency soared to its strongest positions since October 2021 yesterday, as investors ditched the dollar following the news of a Middle East ceasefire.
As we’ve been saying for the past couple of weeks, rising tensions in the region are doubly damaging for the euro given the impact on both risk sentiment and oil prices (the Euro Area is a big net importer of the commodity).
Conversely, however, an easing in the conflict is disproportionately positive for the EUR/USD exchange rate, particularly now that oil futures are now trading lower than they were prior to Israel’s initial attack less than a fortnight ago.
The June PMI numbers out of the Eurozone on Monday were a disappointment, but investors didn’t seem overly bothered. The composite index unexpectedly remained unchanged at 50.2, after economists had braced for a rebound to 50.5, while Tuesday morning’s German IFO sentiment figures came in almost entirely in line with estimates.
For now, however, macroeconomic news is merely a side note, with EUR/USD almost entirely driven by rising dollar shorts, rather than a more positive outlook for the common bloc’s economy.
Author
Matthew Ryan, CFA
Ebury
Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.
