EUR/USD: Geopolitics and ECB path – DBS

FXStreet Insights Team FXStreet

DBS Group economist Philip Wee highlights that EUR/USD fell 4% to 1.1415 in early March as Iran-related tensions boosted safe-haven Dollar demand. Markets price two ECB hikes in June and September, and unless the ECB pushes back, EUR/USD is expected to find support near 1.1390. The ECB is seen monitoring geopolitics calmly while watching inflation expectations.

Euro pressured but key support eyed

"EUR/USD was pressured during the first half of March, retreating 4% to 1.1415. This correction is primarily due to the geopolitical premium driven by the ongoing conflict in Iran, which prompted a flight to safety into USD. "

"EUR’s trajectory this week hinges on the European Central Bank (ECB) meeting on March 19. Currently, the market is pricing in two 25-bps rate hikes for this year, specifically in June and September."

"Unless the ECB explicitly pushes back against this hawkish pricing, we expect EUR/USD to find support near the pivotal low of 1.1390 on August 1."

"ECB President Christine Lagarde asserted that the governing council will do everything necessary to prevent a repeat of the 2022-23 inflation spiral."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD sticks to positive bias above 0.7100; lacks bullish conviction

AUD/USD trades with a positive bias for the second straight day, holding above 0.7100 in the Asian session on Friday as softer US bond yields keep US Dollar bulls on the back foot. Furthermore, hawkish RBA Governor Bullock's comments boost rate hike bets and support the Aussie. However, the Fed's hawkish outlook, along with geopolitical uncertainties, limits USD losses and caps the pair.

USD/JPY approaches 158.00 as Japanese Yen resumes decline

USD/JPY is resuming its upside in the European session on Friday, refreshing two-week highs and nearing 158.00. The Japanese Yen extends losses, despite the Bank of Japan's (BoJ) expected rate hike to 1.25% and hawkish Governor Ueda's comments, as two surprise dissents against the rate hike weigh on it.

Gold tests $$4,400 as softer US bond yields cap USD gains

Gold scales higher for the second straight day and continues to hit new weekly highs through the first half of the European session on Friday, with bulls now awaiting a sustained move beyond the $4,400 mark before positioning for further gains. Retreating US Treasury bond yields keep the US Dollar (USD) uptrend capped ahead of Fedspeak and mid-tier US data.

Bitcoin extends recovery, Ethereum eyes $2,500, XRP holds $1.30

Bitcoin (BTC), Ethereum (ETH) and Ripple (XRP) extend their recovery, trading above $76,700, $2,400 and $1.300, respectively, on Friday. These top three cryptocurrencies now face key technical levels that could determine whether their recoveries extend further or pull back.

Pi Network halts the decline amid KYC, mainnet migration upgrades

Pi Network (PI) edges higher on Friday after three consecutive days of losses, totaling a 15% decline. Pi Core Team announced clearing 417,000 duplicate accounts with the release of new Know Your Customer and mainnet migration upgrades. Still, the technical outlook for PI is bearish, with the record low of $0.0704 in focus.

How Japan became the World's Banker and why that era may be ending

Japan's ultra-low interest rates helped finance trillions of dollars in global investments for more than a decade, making the Japanese Yen one of the world’s cheapest sources of funding. With the Bank of Japan expected to tighten policy again this week, that advantage may be entering a new phase. While most major economies raised interest rates, Japan remained the world's outlier.