Euro slips back below 1.15, geopolitics and Oil prices 'take centre stage'

Matthew Ryan, CFA Ebury

The euro has fallen back below the 1.15 level versus the dollar this week, extending its month-to-date losses to more than one percent after the hawkish Fed announcement.

European currencies in general are being hit by multiple fronts of late as the jump in global oil prices is damaging terms of trade, while fears over inflation and the sell off in bond markets is driving flows into the safe-havens.

Admittedly, the ECB struck a hawkish note of its own last week though this had largely been priced in beforehand, and its the upward repricing in the Fed’s rate path that has done much of the heavy lifting in driving EUR/ USD lower.

There’s very little macroeconomic news to round out of the week in the Euro Area, or anywhere for that matter, on Friday.

With the major central bank meetings for September now in the rear view mirror, expect geopolitics and the rise in oil prices to take centre stage again.

Any further moves higher in Brent crude could be greeted with further euro weakness, and we wouldn’t be shocked to see the EUR/USD pair have a run at the 1.14 level in the near-term before recovering towards the end of the year.

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.

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