- EUR/USD attempts to recover from five-month lows amid escalated Middle-East tension.
- Iran launched explosive drones and missiles at Israel late Saturday.
- The pair received downward pressure by diverging policy scenarios for the ECB and Fed.
EUR/USD edges up to near 1.0650 during the Asian session on Monday, recovering from a five-month low of 1.0622 reached last Friday. The US Dollar (USD) gained ground due to increased dollar-buying due to geopolitical turmoil, which contributed to downward pressure on the EUR/USD pair.
Over the weekend, Iran retaliated against a suspected Israeli attack on its consulate in Syria by launching explosive drones and missiles at Israel. Despite this escalation, the markets remained relatively calm, possibly due to Iran's advance notice of the attack, which helped mitigate the risk of further escalation.
According to reports from Reuters, officials from Turkey, Jordan, and Iraq stated that Iran had provided advanced notice days before the attack, allowing measures to prevent mass casualties and a worsening of the situation. However, a US official denied this claim. Additionally, US President Joe Biden told Israel that the United States would not participate in any retaliatory actions.
The EUR/USD pair faced downward pressure as the European Central Bank (ECB) and the Federal Reserve (Fed) revealed diverging monetary policy outlooks. The ECB indicated that if underlying inflation continues to slow as expected, there could be a consideration to lower policy rates in June.
In contrast, robust US inflation and strong macroeconomic indicators are prompting the Fed to reconsider its plans for monetary easing. The probability of interest rates remaining unchanged at the June meeting has increased to 63.5% according to the CME FedWatch Tool, up from 46.8% the previous week. Investors will closely monitor seasonally adjusted Eurozone Industrial Production data and US Retail Sales figures on Monday.
Boston Federal Reserve (Fed) President Susan Collins remarked on Friday that she anticipates 'around two' rate cuts for 2024, while still expecting inflation pressures to diminish later this year. She emphasized the uncertainty surrounding the timing of potential rate cuts and noted that while a rate hike is not currently part of the baseline scenario, it cannot be entirely ruled out.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD declines toward 1.0850 after US data
EUR/USD extends its downward correction toward 1.0850 in the American session. The US Department of Labor reported that there were 222,000 first-time application for unemployment benefits last week, helping the USD hold its ground and causing the pair to stretch lower.
GBP/USD corrects to 1.2650 area on modest USD recovery
After touching its highest level in over a month at 1.2700, GBP/USD reversed its direction and declined toward 1.2650 on Thursday. The modest USD rebound seen following Wednesday's sharp decline makes it difficult for the pair to regain its traction.
Gold finds resistance near $2,400, retreats below $2,380
Gold advanced toward $2,400 on Wednesday as US Treasury bond yields pushed lower following the April inflation data. The recovery in US yields combined with the US Dollar's resilience after Jobless Claims data, however, causes XAU/USD to retreat toward $2,370 on Thursday.
Is the crypto bull run back? Premium
Bitcoin’s ascent to $65,000 seems to have breathed hope into the choppy crypto markets. Some altcoins have shot up 10% to 20% due to BTC’s comeback. Investors wonder if this is the resumption of the crypto bull run.
BRICS, the West and the rest – global trade hubs and de-dollarization
World trade is fragmenting into opposing blocks, warns the IMF. The BRICS and their allies are distancing themselves from the West. BRICS are attempting to de-dollarize and replace SWIFT to circumvent the threat of sanctions.